Euro Area Policies: Selected Issues

IMF Staff Country Reports, July 8, 2016

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Euro Area Policies: Selected Issues

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Bibliographic details

• Published: July 8, 2016
• Series: IMF Staff Country Reports
• DOI: https://doi.org/10.5089/9781498353694.002

Summary and key findings

• The paper examines the impact of workforce aging on productivity in the euro area.
• The euro area population has aged considerably over the past few decades, and the process is expected to accelerate in the years ahead.
• Labor productivity growth in the euro area has been sluggish, posing risks to long-term growth prospects.
• It is estimated that workforce aging could significantly retard total factor productivity (TFP) growth over the medium to long term.
• Given current demographic projections from the Organisation for Economic Co-operation and Development, the aging of the workforce in the euro area could lower TFP growth by about 0.2 percentage points each year between 2014 and 2035.
• Appropriate policies can mitigate the adverse effects of aging.

Quantitative projection

• Workforce aging impact on TFP: could lower TFP growth by about 0.2 percentage points each year between 2014 and 2035.

Risks and implications

• Sluggish labor productivity growth increases risks to long-term growth prospects in the euro area.
• Accelerating population aging magnifies the potential drag on total factor productivity over the medium to long term.

Policy recommendations (high-level)

• Implement appropriate policies to mitigate the adverse effects of workforce aging on productivity.
• Focus areas implied by the subject keywords include labor market policies, financial services and deposit/central bank policy considerations, and measures to support production and TFP.

Subjects and keywords

• Subjects: Aging, Central bank policy rate, Deposit rates, Financial services, Labor, Labor force, Population and demographics, Production, Total factor productivity
• Keywords: Aging, Area budget, Central bank policy rate, CR, deposit rate, Deposit rates, euro, Euro area policy, euro area treasury, Europe, Global, IMF staff calculation, ISCR, Labor force, rate, Total factor productivity

International Monetary Fund. Euro Area Policies: Selected Issues. July 8, 2016.

Content in this bundle

• Euro Area Policies: Selected Issues; IMF Country Report No. 16/220; June 22, 2016
  • Euro Area Policies: Selected Issues; IMF Country Report No. 16/220; June 22, 2016 (Markdown version)
  • Euro Area Policies: Selected Issues; IMF Country Report No. 16/220; June 22, 2016 (PDF)