December 14, 2021
30 Years of Generational Accounting: A Critical Review
The question whether fiscal policies can be considered sustainable in the light of population ageing is old, but still relevant. Even more so, its relevance has increased recently as public debt levels have gone up dramatically as a result of the COVID-19 crisis. The follow-up question if public
finances are deemed unsustainable is also still relevant: to what level should the public debt ratio be reduced in order to restore fiscal sustainability?
The standard approach to assess fiscal sustainability is that of generational accounting (GA). This paper reviews GA. It argues that GA is a powerful instrument that puts the finger on the balance between generations. At the same time, GA suffers from some weaknesses that have become more significant over time. We conclude that it is time to update GA.
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