Fiscal Policy In An Ageing Society

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At Moody’s we spend a great deal of time studying the issue of pension burdens for countries around the world.

To prepare for the upcoming demographic transition, most countries have been trying to improve their fundamental fiscal position to at least accommodate some of the cost increases in future pension claims. Therefore, it is not surprising to see that most developed countries have tried to reign in their public sector debt, with varying degrees of success. Despite the numbers noted above, which capture net present values, there are different trajectories for the implied debt build-up among the various countries depending upon the individual country’s demographics. For instance, almost all developed countries have very low birth rates. What usually distinguishes one country from another demographically is the rate of immigration. Those countries with significant immigration have a longer time horizon over which to deal with the debt burden. Countries with traditionally low levels of immigration, for instance Italy and Japan, will simply age more rapidly than most of the other major developed countries.

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".