Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/205515
Authors: 
Guest, Ross
Bryant, John
Scobie, Grant
Year of Publication: 
2003
Series/Report no.: 
New Zealand Treasury Working Paper No. 03/10
Publisher: 
New Zealand Government, The Treasury, Wellington
Abstract: 
Over the next 50 years, New Zealand's population will age substantially. There has been wide debate about whether New Zealand should prepare for population ageing by increasing national savings. The debate had not, however, involved explicit consideration of possible time paths for savings, consumption, debt, and other relevant macroeconomic variables; nor have explicit principles been offered for determining which of these time paths are to be preferred. This paper addresses the question of choosing time paths through the use of a Ramsey-Solow model of optimal saving, adapted for investigating problems of population ageing. The results suggest that population ageing alone would not justify increases in national savings rates beyond those envisaged by current policy. The cost of ageing in terms of reduced real consumption is not large enough to justify large additional savings beyond those currently predicted, and the concomitant reduction in current consumption. The findings concerning national savings and living standards are robust to a variety of specifications of demographic conditions, interest rates, and productivity growth.
Subjects: 
consumption
saving
inter-temporal paths
Ramsey model
population ageing
New Zealand
JEL: 
D9
E21
J11
Creative Commons License: 
https://creativecommons.org/licenses/by/4.0/
Document Type: 
Working Paper

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