Characterizing the Expenditure Uncertainties of Industrial Countries in the 21st Century

35 Pages Posted: 3 Mar 2006

See all articles by Peter Heller

Peter Heller

International Monetary Fund (IMF)

David Hauner

International Monetary Fund (IMF) - African Department

Date Written: May 2005

Abstract

A number of uncertainties about long-term expenditure commitments in industrial countries are examined: (i) the assumptions underlying the projections, (ii) the potential to further reduce non-age-related expenditures, (iii) the implicitly assumed absence of shocks, and (iv) the potential for raising revenue. This paper concludes that (i) there is scope, but within narrow limits, to reduce non-age-related expenditures; (ii) fiscal policy frameworks tend to understate risks; and (iii) prevailing tax rates leave little room for increasing taxation in the countries facing the strongest aging pressures. In sum, governments will have to adopt a much more ambitious fiscal policy stance to cope with aging populations.

Keywords: Public expenditures, fiscal sustainability, fiscal frameworks, aging

JEL Classification: H5, H6

Suggested Citation

Heller, Peter and Hauner, David, Characterizing the Expenditure Uncertainties of Industrial Countries in the 21st Century (May 2005). IMF Working Paper, Vol. , pp. 1-35, 2005. Available at SSRN: https://ssrn.com/abstract=888137

Peter Heller (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

David Hauner

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

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

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