The international spillover effects of ageing and pensions

One of the central conclusions that emerges from this thesis is that countries with large funded pension systems are in the long run negatively affected by the fact that other countries have extensive PAYG schemes. This is especially the case when PAYG countries use government debt to finance their pension burden. High levels of government debt may lead to inflationary pressures. In a monetary union like the EMU it will therefore be important for funded countries that the rules of the Stability and Growth Pact are met and that the ECB is independent, credible and transparent. The thesis also shows that pension reform in a PAYG country can have adverse consequences for countries with funded pension schemes. In a common capital market like the EU, it would therefore be in the interest of funded countries that pension reform is not decided upon in isolation by separate member countries, but that there is some coordination or even centralisation of decision making.