Global Aging and Declining World Interest Rates

How will the world-wide decline in real interest rates associated with global aging affect small open economies (SOEs) with aging populations? Lower interest rates will result in higher capital-labor ratios and increased wages; higher wages, in turn, will be passed on to pension benefits, exacerbating aging-related fiscal pressures. The pass-through effect will be stronger if pensions are indexed to nominal wages rather than prices. Using an overlapping generations model, the paper illustrates the interest rates transmission mechanism and its interaction with pension indexation for the case of

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Year of publication:	2008
Authors:	Hoffmaister, Alexander W.
Other Persons:	Guajardo, Jaime (contributor) ; Catalán, Mario (contributor)
Publisher:	Washington : International Monetary Fund
Subject:	Alternde Bevölkerung \| Aging population \| Welt \| World \| OECD-Staaten \| OECD countries \| Realzins \| Real interest rate \| Globalisierung \| Globalization \| Zins \| Interest rate

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Extent:	Online-Ressource (42 p)
Series:	IMF Working Papers IMF working paper ; WP/08/98
Type of publication:	Book / Working Paper
Language:	English
Notes:	Description based upon print version of record Contents; I. Introduction; II. The Model; A. Model Overview; B. Households; C. Firms; D. The Government; E. Equilibrium; F. Balanced Growth Equilibrium and Calibration; G. Demographic Transition; III. Baseline Simulations; A. Scenario 1: Constant World Interest Rates; B. Scenarios 2 and 3: Declining World Interest Rates; IV. Pension Reform Simulations; A. Description of Pension Reforms; B. Simulation Results for Constant Interest Rates; C. Pension Reform as Macroeconomic Insurance; V. Conclusions; Tables; 1. Variable Definition and Notation; 2. Household's Optimization Problems 3. First Order Conditions-Private Household's Optimization Problem4. First Order Conditions-Public Household's Optimization Problem; 5. Calibration of the Model; 6. Pension Expenditure Reductions from Reforms; Figures; 1. Labor Skills Profile by Age; 2. Health Care Expenditure by Age Group; 3. Dependency Ratio in Model: Retired over Working Population; 4. Macroeconomic Results-Baseline Scenarios under Constant and Variable Interest Rates.; 5. Macroeconomic Results-Reform Scenarios under Constant and Variable Interest Rates .. 6. Decomposition of Pension Expenditure-to-GNI-Ratios-Pension Reform and Interest Rate ScenariosReferences
ISBN:	978-1-4518-6959-0 ; 978-1-4519-1413-9 ; 978-1-4518-6959-0
Source:	ECONIS - Online Catalogue of the ZBW

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