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Macroeconomic Effects of Public Pension Reforms


  • Joana Pereira
  • Philippe D Karam
  • Dirk V Muir
  • Anita Tuladhar


The paper explores the macroeconomic effects of three public pension reforms, namely an increase in retirement age, a reduction in benefits and an increase in contribution rates. Using a five-region version of the IMF‘s Global Integrated Monetary and Fiscal model (GIMF), we find that public pension reforms can have a positive effect on growth in both the short run, propelled by rising consumption, and in the long run, due to lower government debt crowding in higher investment. We also find that a reform action undertaken cooperatively by all regions results in larger output effects, reflecting stronger capital accumulation due to higher world savings. An increase in the retirement age reform yields the strongest impact in the short run, due to the demand effects of higher labor income and in the long run because of supply effects.

Suggested Citation

  • Joana Pereira & Philippe D Karam & Dirk V Muir & Anita Tuladhar, 2010. "Macroeconomic Effects of Public Pension Reforms," IMF Working Papers 10/297, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:10/297

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    References listed on IDEAS

    1. Boris Cournède & Frédéric Gonand, 2006. "Restoring Fiscal Sustainability in the Euro Area: Raise Taxes or Curb Spending?," OECD Economics Department Working Papers 520, OECD Publishing.
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    Cited by:

    1. Luca MARCHIORI & Olivier PIERRARD & Henri R. SNEESSENS, 2011. "Demography, capital flows and unemployment," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2011040, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    2. Kiichi Tokuoka, 2012. "Intergenerational Implications of Fiscal Consolidation in Japan," IMF Working Papers 12/197, International Monetary Fund.
    3. Aida Caldera Sánchez & Alain de Serres & Naomitsu Yashiro, 2016. "Reforming in a difficult macroeconomic context: A review of the issues and recent literature," OECD Economics Department Working Papers 1297, OECD Publishing.
    4. Frank Eich & Mauricio Soto & Charleen A Gust, 2012. "Reforming the Public Pension System in the Russian Federation," IMF Working Papers 12/201, International Monetary Fund.
    5. Aaron G Grech, "undated". "The possible impact of pension age changes on Malta’s potential output," CBM Policy Papers PP/01/2016, Central Bank of Malta.
    6. Seok G Park, 2012. "Quantifying Impact of Aging Population on Fiscal Space," IMF Working Papers 12/164, International Monetary Fund.


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