Fiscal policy in the face of long-term expenditure uncertainties |
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Authors: | Peter S Heller David Hauner |
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Institution: | (1) Fiscal Affairs Department International Monetary Fund, USA |
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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.
JEL Code H5 · H6 |
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Keywords: | Public expenditures Fiscal sustainability Fiscal frameworks Aging |
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