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Ensuring Fiscal Sustainability in G-7 Countries

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Author Info

  • Daniel Leigh
  • David Hauner
  • Michael Skaarup

Abstract

Rising longevity, falling fertility rates, and the retirement of the baby boom generation will substantially raise age-related government spending in most advanced and many emerging market countries. This paper assesses the evolution of fiscal sustainability for each of the G-7 countries using two standard primary gap indicators. The estimated fiscal adjustment required to ensure long-run fiscal sustainability is substantial for all G-7 countries. In particular, ensuring fiscal sustainability would require an average improvement in the primary balance of about 4 percentage points of GDP. While the overall adjustment required to achieve long-run fiscal sustainability in G-7 countries is large, there are significant growth benefits to putting public finances on a sustainable footing in the near term versus delayed adjustment.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 07/187.

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Length: 29
Date of creation: 01 Jul 2007
Date of revision:
Handle: RePEc:imf:imfwpa:07/187

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Related research

Keywords: Fiscal sustainability; Aging; Group of seven; Government expenditures; Economic models;

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Cited by:
  1. Manmohan S. Kumar & Dennis P. J. Botman, 2007. "Global Aging Pressures: Impact of Fiscal Adjustment, Policy Cooperation, and Structural Reforms," IMF Working Papers 07/196, International Monetary Fund.
  2. Murtaza H. Syed & Michael Skaarup & Tarhan Feyzioglu, 2008. "Addressing Korea's Long-Term Fiscal Challenges," IMF Working Papers 08/27, International Monetary Fund.
  3. Paolo Biraschi & Lorenzo Codogno & Federico Giammusso & Manuela Nenna & Juan Pradelli, . "Are Italy's public finances sustainable? The role of demographics, productivity, and labour markets," Working Papers wp2008-6, Department of the Treasury, Ministry of the Economy and of Finance.
  4. Volker Meier & Martin Werding, 2010. "Ageing and the Welfare State: Securing Sustainability," CESifo Working Paper Series 2916, CESifo Group Munich.
  5. Martin Werding & Stuart McLennan, 2012. "International Portability of Health-Cost Cover: Mobility, Insurance, and Redistribution," CESifo Working Paper Series 3952, CESifo Group Munich.
  6. Grech, Aaron George, 2012. "Evaluating the possible impact of pension reforms on future living standards in Europe," MPRA Paper 39851, University Library of Munich, Germany.
  7. Werding, Martin & McLennan, Stuart, 2011. "International portability of health-cost coverage : concepts and experience," Social Protection Discussion Papers 63929, The World Bank.
  8. Andersen, Torben M, 2008. "Fiscal Sustainability and Demographics - Should We Save or Work More?," CEPR Discussion Papers 7044, C.E.P.R. Discussion Papers.

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