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Addressing Korea's Long-Term Fiscal Challenges

  • Murtaza H. Syed
  • Michael Skaarup
  • Tarhan Feyzioglu
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    Korea is on the verge of an unprecedented demographic shift. In coming decades, rapid aging will transform it from one of the youngest populations in the OECD to among the oldest in record time. In turn, this shift will put tremendous pressure on the pension system and health and long-term care expenditures. This paper evaluates the impact of population aging on the long-term fiscal position in Korea, and assesses potential policy responses using the IMF's Global Fiscal Model. The paper finds that the key to maintaining a sound long-run fiscal position is to act early and with a range of policy tools, including pension reform, tax base broadening (and, if necessary, rate hikes), improved tax administration and some expenditure reallocation.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/27.

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    Length: 25
    Date of creation: 01 Jan 2008
    Date of revision:
    Handle: RePEc:imf:imfwpa:08/27
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    1. Batini, Nicoletta & Jackson, Brian & Nickell, Stephen, 2005. "An open-economy new Keynesian Phillips curve for the U.K," Journal of Monetary Economics, Elsevier, vol. 52(6), pages 1061-1071, September.
    2. Douglas Laxton & Paolo Pesenti, 2003. "Monetary Rules for Small, Open, Emerging Economies," NBER Working Papers 9568, National Bureau of Economic Research, Inc.
    3. Daniel Leigh & David Hauner & Michael Skaarup, 2007. "Ensuring Fiscal Sustainability in G-7 Countries," IMF Working Papers 07/187, International Monetary Fund.
    4. Benedict J. Clements & Sanjeev Gupta & Erwin Tiongson & Emanuele Baldacci, 2003. "What Sustains Fiscal Consolidations in Emerging Market Countries?," IMF Working Papers 03/224, International Monetary Fund.
    5. Dennis P. J. Botman & Keiko Honjo, 2006. "Options for Fiscal Consolidation in the United Kingdom," IMF Working Papers 06/89, International Monetary Fund.
    6. Dennis P. J. Botman & Papa M'B. P. N'Diaye & Hali J. Edison, 2007. "Strategies for Fiscal Consolidation in Japan," IMF Working Papers 07/37, International Monetary Fund.
    7. Dirk Muir & Douglas Laxton & Dennis P. J. Botman & Andrei Romanov, 2006. "A New-Open-Economy Macro Model for Fiscal Policy Evaluation," IMF Working Papers 06/45, International Monetary Fund.
    8. repec:rus:hseeco:316816 is not listed on IDEAS
    9. Dennis P. J. Botman & Stephan Danninger, 2007. "Tax Reform and Debt Sustainability in Germany; An Assessment Using the Global Fiscal Model," IMF Working Papers 07/46, International Monetary Fund.
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