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Debt Sustainability in the Context of Population Ageing: A Risk Management Approach

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  • Samantha Ajovalasit

    (Department of Economics, Business, and Statistics, University of Palermo, Viale delle Scienze, 90128 Palermo, Italy)

  • Andrea Consiglio

    (Department of Economics, Business, and Statistics, University of Palermo, Viale delle Scienze, 90128 Palermo, Italy)

  • Davide Provenzano

    (Department of Economics, Business, and Statistics, University of Palermo, Viale delle Scienze, 90128 Palermo, Italy)

Abstract

The ageing of the population has negative effects on the gross domestic product (GDP), influencing various economic and social aspects. These effects, in turn, contribute to an increase in the debt-to-GDP ratio, raising concerns about the long-term sustainability of public debt. The objective of our study is to evaluate the possible dynamics of debt sustainability with a certain level of probability. The analysis employs the stochastic modelling of risk factors influencing the debt-to-GDP ratio, particularly emphasising the economic consequences of population ageing. Using advanced risk management techniques, we aim to provide a robust assessment of how future demographic outlooks impact debt sustainability.

Suggested Citation

  • Samantha Ajovalasit & Andrea Consiglio & Davide Provenzano, 2024. "Debt Sustainability in the Context of Population Ageing: A Risk Management Approach," Risks, MDPI, vol. 12(12), pages 1-23, November.
    • Handle: RePEc:gam:jrisks:v:12:y:2024:i:12:p:188-:d:1530010
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    References listed on IDEAS

    as
    1. Rainer Kotschy & David E. Bloom & Rainer Franz Kotschy, 2023. "Population Aging and Economic Growth: From Demographic Dividend to Demographic Drag?," CESifo Working Paper Series 10613, CESifo.
    2. Henning Bohn, 1998. "The Behavior of U. S. Public Debt and Deficits," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(3), pages 949-963.
    3. Andrea Consiglio & Angelo Carollo & Stavros A. Zenios, 2016. "A parsimonious model for generating arbitrage-free scenario trees," Quantitative Finance, Taylor & Francis Journals, vol. 16(2), pages 201-212, February.
    4. Mr. Shekhar Aiyar & Mr. Christian H Ebeke, 2016. "The Impact of Workforce Aging on European Productivity," IMF Working Papers 2016/238, International Monetary Fund.
    5. Yunus Aksoy & Henrique S. Basso & Ron P. Smith & Tobias Grasl, 2019. "Demographic Structure and Macroeconomic Trends," American Economic Journal: Macroeconomics, American Economic Association, vol. 11(1), pages 193-222, January.
    6. Hernán Ricardo Briceño & Javier Perote, 2020. "Determinants of the Public Debt in the Eurozone and Its Sustainability Amid the Covid-19 Pandemic," Sustainability, MDPI, vol. 12(16), pages 1-29, August.
    7. Bodnár, Katalin & Nerlich, Carolin, 2022. "The macroeconomic and fiscal impact of population ageing," Occasional Paper Series 296, European Central Bank.
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