## Population Aging in Japan: Demographic Shock and Fiscal Sustainability (WP/01/40)

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### Abstract / Purpose
- The paper develops a general equilibrium framework to examine the economic implications of population aging in Japan.
- Particular attention is paid to aggregate saving behavior, which is modeled on the basis of empirical age-earnings profiles using a life-cycle approach.
- The paper’s objectives are:
  - (i) estimate the output loss caused by demographic changes and assess the impact of aging on Japan's government finances; and
  - (ii) compare fiscal policy options with respect to their effects on output growth and economic welfare.

### Methodology (as stated)
- General equilibrium framework.
- Aggregate saving behavior modeled using empirical age-earnings profiles.
- Life-cycle approach to savings and demographic modeling.

### Key Metadata and Classification
- Working Paper number: WP/01/40
- Departments: Research and Asia and Pacific Departments
- Authors: Hamid Faruqee and Martin Mühleisen
- Authorized for distribution by: Peter Isard and Jonathan D. Ostry
- Date: April 2001
- JEL Classification Numbers: D58, E21, E27, E62
- Keywords: Japan, aging, saving, fiscal policy, general equilibrium analysis
- Author E-Mail Addresses: hfaruqee@imf.org; mmuhleisen@imf.org

### Acknowledgements (as stated)
- The authors wish to thank Charles Collyns, Jonathan D. Ostry, participants at an APD research seminar and four anonymous referees for valuable comments.
- Excellent research assistance by Susanna Mursula and Sarma Jayanthi is also gratefully acknowledged.

*WP/01/40 — Population Aging in Japan: Demographic Shock and Fiscal Sustainability, April 2001.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2001/_wp0140.pdf_