Pensions, Price Shocks, and Macroeconomic Stability in Transition Economies

Illustrations From Belarus

• Author(s): Mr.Ehtisham Ahmad, Mr.Alex Mourmouras, Mr.Jean-Luc Schneider, Sergio Lugaresi,
• Publisher: International Monetary Fund
• Pages: 30
• ISBN_10: 1451847181
  ISBN_13: 9781451847185
  
• Language: en
• Categories: Business & Economics / Labor / General , Business & Economics / Public Finance , Social Science / Demography ,

Description:... In many countries of the former Soviet Union, pensioners form a large and vulnerable group of the population, with pensions fixed in nominal terms. Attempts to “protect” this group have included a revaluation of benefits for retirees and the introduction of indexation arrangements based on recent wage and price growth. In this paper, lagged indexation arrangements are shown to have large destabilizing effects that can potentially jeopardize the macroeconomic adjustment effort, particularly as inflation begins to decelerate. Some long-term problems relating to the aging of the population and associated policies are also discussed. Illustrative examples from Belarus are presented.