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The Impact of Population Ageing on the Czech Economy

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  • Jan Babecky
  • Kamil Dybczak

Abstract

The Czech Republic is facing a population ageing phenomenon. In addition, its demographic structure is expected to change dramatically over the next 50 years. We apply a stylised overlapping generation model in order to analyse the potential effects of the expected demographic changes on aggregate economic performance taking into account alternative fiscal policy set-ups. We provide a rough estimate of the amendments necessary on the revenue and expenditure sides in order to keep the current system financially balanced. We also discuss the implications for the development of other economic variables. In particular, we separately simulate future developments in the cases of adjustment in either the contribution rate or the value of public benefit. In addition, we demonstrate that parametric changes, such as an increase in the statutory retirement age, cannot eliminate the impact of the deterioration in the demographic structure on the course of the economy.

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Bibliographic Info

Paper provided by Czech National Bank, Research Department in its series Working Papers with number 2009/1.

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Date of creation: Sep 2009
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Handle: RePEc:cnb:wpaper:2009/1

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Keywords: Population ageing; public pension systems; social security.;

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References

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  1. Axel Borsch-Supan & Lothar Essig, 2003. "Household Saving in Germany: Results of the first SAVE study," NBER Working Papers 9902, National Bureau of Economic Research, Inc.
  2. Rasmussen, Tobias N. & Rutherford, Thomas F., 2004. "Modeling overlapping generations in a complementarity format," Journal of Economic Dynamics and Control, Elsevier, vol. 28(7), pages 1383-1409, April.
  3. Oliveira Martins, Joaquim & Gonand, Frédéric & Antolín, Pablo & de la Maisonneuve, Christine & Yoo, Kwang-Yeol, 2005. "The Impact of Ageing on Demand, Factor Markets and Growth," Economics Papers from University Paris Dauphine 123456789/11049, Paris Dauphine University.
  4. Higgins, Matthew, 1998. "Demography, National Savings, and International Capital Flows," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 343-69, May.
  5. Alexander W. Hoffmaister & Mario Catalán & Jaime Guajardo, 2007. "Coping with Spain's Aging," IMF Working Papers 07/122, International Monetary Fund.
  6. James Poterba, 2004. "The Impact of Population Aging on Financial Markets," NBER Working Papers 10851, National Bureau of Economic Research, Inc.
  7. Alan J. Auerbach & Laurence J. Kotlikoff & Robert P. Hagemann & Giuseppe Nicoletti, 1989. "The Economic Dynamics of an Ageing Population: The Case of Four OECD Countries," OECD Economics Department Working Papers 62, OECD Publishing.
  8. French, Kenneth R & Poterba, James M, 1991. "Investor Diversification and International Equity Markets," American Economic Review, American Economic Association, vol. 81(2), pages 222-26, May.
  9. Vladimir Bezdek & Kamil Dybczak & Ales Krejdl, 2003. "Czech Fiscal Policy: Introductory Analysis," Working Papers, Czech National Bank, Research Department 2003/07, Czech National Bank, Research Department.
  10. M De Nardi & S Imrohoroglu & TJ Sargent, 2001. "Saving and pension reform in general equilibrium models," Oxford Review of Economic Policy, Oxford University Press, vol. 17(1), pages 20-39, Spring.
  11. Barry P. Bosworth & Ralph C. Bryant & Gary Burtless, 2004. "The Impact of Aging on Financial Markets and the Economy: A Survey," Working Papers, Center for Retirement Research at Boston College 2004-23, Center for Retirement Research.
  12. Ahearne, Alan G. & Griever, William L. & Warnock, Francis E., 2004. "Information costs and home bias: an analysis of US holdings of foreign equities," Journal of International Economics, Elsevier, vol. 62(2), pages 313-336, March.
  13. Buiter, Willem H, 1997. "Generational Accounts, Aggregate Saving and Intergenerational Distribution," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 64(256), pages 605-26, November.
  14. Domeij, David & Flodén, Martin, 2004. "Population Ageing and International Capital Flows," CEPR Discussion Papers 4644, C.E.P.R. Discussion Papers.
  15. Kamil Dybczak, 2006. "Generational Accounts in the Czech Republic," Working Papers, Czech National Bank, Research Department 2006/2, Czech National Bank, Research Department.
  16. Stefan W. Schmitz, 2007. "Demographic Change, Bank Strategy and Financial Stability," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 13, pages 98-114.
  17. Martin Feldstein & Charles Horioka, 1979. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc.
  18. Börsch-Supan, Axel & Ludwig, Alexander & Winter, Joachim, 2004. "Aging, Pension Reform, and Capital Flows:," Sonderforschungsbereich 504 Publications 04-65, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
  19. Miles, David K, 1997. "Modelling the Impact of Demographic Change Upon the Economy," CEPR Discussion Papers 1762, C.E.P.R. Discussion Papers.
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Citations

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Cited by:
  1. David Kocourek & Filip Pertold, 2011. "The Impact of Early Retirement Incentives on Labor Market Participation: Evidence from a Parametric Change in the Czech Republic," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, Charles University Prague, Faculty of Social Sciences, vol. 61(5), pages 467-483, November.
  2. Robert Ambrisko & Jan Babecky & Jakub Rysanek & Vilem Valenta, 2012. "Assessing the Impact of Fiscal Measures on the Czech Economy," Working Papers, Czech National Bank, Research Department 2012/15, Czech National Bank, Research Department.
  3. David Kocourek & Filip Pertold, 2009. "Impact of Early Retirement Incentives on Labour Market Participation: Evidence from a Parametric Change in the Czech Republic," Working Papers, Czech National Bank, Research Department 2009/7, Czech National Bank, Research Department.

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