A Tradeoff between the Output and Current Account Effects of Pension Reform

 
Author/Editor: Catalan, Mario ; Magud, Nicolas
 
Publication Date: December 03, 2012
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: We compare the long-term output and current account effects of pension reforms that increase the retirement age with those of reforms that cut pension benefits, conditional on reforms achieving similar fiscal targets. We show the presence of a policy trade-off. Pension reforms that increase the retirement age have a large positive effect on output, but a small (and often negative) effect on the current account. In contrast, reforms that cut pension benefits improve the current account balance but reduce output. Mixed pension reforms, which extend the working life and cut pension benefits, can simultaneously boost output and the current account.
 
Series: Working Paper No. 12/283
Subject(s): Pension reforms | Production | Current account | Economic models

 
English
Publication Date: December 03, 2012
ISBN/ISSN: 9781475563948/2227-8885 Format: Paper
Stock No: WPIEA2012283 Pages: 24
Price:
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