Ensuring Fiscal Sustainability in G-7 Countries

31 Pages Posted: 23 Aug 2007

See all articles by David Hauner

David Hauner

International Monetary Fund (IMF) - African Department

Daniel Leigh

International Monetary Fund (IMF)

Michael Skaarup

International Monetary Fund (IMF)

Date Written: July 2007

Abstract

Rising longevity, falling fertility rates, and the retirement of the baby boom generation will substantially raise age-related government spending in most advanced and many emerging market countries. This paper assesses the evolution of fiscal sustainability for each of the G-7 countries using two standard primary gap indicators. The estimated fiscal adjustment required to ensure long-run fiscal sustainability is substantial for all G-7 countries. In particular, ensuring fiscal sustainability would require an average improvement in the primary balance of about 4 percentage points of GDP. While the overall adjustment required to achieve long-run fiscal sustainability in G-7 countries is large, there are significant growth benefits to putting public finances on a sustainable footing in the near term versus delayed adjustment.

Keywords: Working Paper, Fiscal policy, Group of seven, Aging, Government expenditures, Economic models

Suggested Citation

Hauner, David and Leigh, Daniel and Skaarup, Michael, Ensuring Fiscal Sustainability in G-7 Countries (July 2007). IMF Working Papers, Vol. , pp. 1-29, 2007. Available at SSRN: https://ssrn.com/abstract=1007936

David Hauner

International Monetary Fund (IMF) - African Department ( email )

1700 19th Street, NW
Washington, DC 20431
United States

Daniel Leigh

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Michael Skaarup

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
154
Abstract Views
798
rank
192,911
PlumX Metrics