Advanced Search
MyIDEAS: Login to save this paper or follow this series

Fiscal sustainability and policy implications for the euro area

Contents:

Author Info

  • Balassone, Fabrizio
  • Cunha, Jorge Correia da
  • Langenus, Geert
  • Manzke, Bernhard
  • Pavot, Jeanne
  • Prammer, Doris
  • Tommasino, Pietro

Abstract

In this paper we examine the sustainability of euro area public finances against the backdrop of population ageing. We critically assess the widely used projections of the Working Group on Ageing Populations (AWG) of the EU's Economic Policy Committee and argue that ageing costs may be higher than projected in the AWG reference scenario. Taking into account adjusted headline estimates for ageing costs, largely based upon the sensitivity analysis carried out by the AWG, we consider alternative indicators to quantify sustainability gaps for euro area countries. With respect to the policy implications, we assess the appropriateness of different budgetary strategies to restore fiscal sustainability taking into account intergenerational equity. Our stylised analysis based upon the lifetime contribution to the government's primary balance of different generations suggests that an important degree of pre-funding of the ageing costs is necessary to avoid shifting the burden of adjustment in a disproportionate way to future generations. For many euro area countries this implies that the medium-term targets defined in the context of the revised stability and growth pact would ideally need to be revised upwards to significant surpluses. --

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://econstor.eu/bitstream/10419/27658/1/200904dkp.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2009,04.

as in new window
Length:
Date of creation: 2009
Date of revision:
Handle: RePEc:zbw:bubdp1:7573

Contact details of provider:
Postal: Postfach 10 06 02, 60006 Frankfurt
Phone: 0 69 / 95 66 - 34 55
Fax: 0 69 / 95 66 30 77
Email:
Web page: http://www.bundesbank.de/
More information through EDIRC

Related research

Keywords: population ageing; fiscal sustainability; generational accounting; medium-term objectives for fiscal policy;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Jean-Claude Trichet, 2010. "Luncheon address: central banking in uncertain times: conviction and responsibility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 243-266.
  2. Bonin, Holger & Patxot, Concepció & Souto, Guadalupe, 2013. "Cyclically neutral generational accounting," ZEW Discussion Papers 13-099, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  3. Axel H. Börsch-Supan, 2012. "Entitlement Reforms in Europe: Policy Mixes in the Current Pension Reform Process," NBER Working Papers 18009, National Bureau of Economic Research, Inc.
  4. Klaus Weyerstrass & Reinhard Neck, 2013. "A young EU member’s ageing: budgetary and macroeconomic consequences of Slovenia’s demographic prospects," Empirica, Springer, vol. 40(3), pages 427-456, August.
  5. Claudia M�nch & Sweder van Wijnbergen, 2009. "Education and Labor Market Activity of Women: An Age-Group Specific Empirical Analysis," Tinbergen Institute Discussion Papers 09-099/2, Tinbergen Institute.
  6. Rossana Merola & Douglas Sutherland, 2013. "Fiscal Consolidation and the Implications of Social Spending for Long-Term Fiscal Sustainability," Review of Economics and Institutions, Università di Perugia, vol. 4(3).
  7. Axel H. Börsch-Supan, 2012. "Entitlement Reforms in Europe: Policy Mixes in the Current Pension Reform Process," NBER Chapters, in: Fiscal Policy after the Financial Crisis, pages 405-435 National Bureau of Economic Research, Inc.
  8. International Monetary Fund, 2010. "Some Uncomfortable Arithmetic Regarding Europe’s Public Finances," IMF Working Papers 10/177, International Monetary Fund.
  9. Christophe Van Nieuwenhuyze, 2013. "Debt, assets and imbalances in the euro area. An aggregate view," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 123-152.
  10. Torben M. Andersen & Marias H. Gestsson, 2010. "Longevity, Growth and Intergenerational Equity - The Deterministic Case," Economics wp52, Department of Economics, Central bank of Iceland.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:zbw:bubdp1:7573. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.