Pension Reform and the Fiscal Policy Stance
December 1, 2001
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Summary
The increased budget deficit caused by the privatization of a public pension plan does not imply a relaxation of the stance of fiscal policy. The reform's impact on the fiscal stance and national saving depends primarily on its effect on the sum of explicit and implicit public debt and on the post-reform payroll tax and private system contribution rates. However, the precise impact of reform also depends on such influences as the relationship between the rates of interest on implicit and explicit public debt. There may be circumstances in which pension privatization, if not offset by fiscal consolidation, will loosen the fiscal stance.
Subject: Expenditure, Fiscal policy, Labor, National accounts, Pension reform, Pension spending, Pensions, Private savings
Keywords: cash-flow deficit, contribution rate, debt, debt default risk, deficit, deficit target, explicit debt, fiscal balance, implicit debt, increase saving, interest rate, old age pension, pension fund saving, pension reform, Pension spending, Pensions, Private savings, rate, rate of return, saving rate, savings behavior, social security, WP
Pages:
16
Volume:
2001
DOI:
Issue:
214
Series:
Working Paper No. 2001/214
Stock No:
WPIEA2142001
ISBN:
9781451874990
ISSN:
1018-5941
