Government fiscal projection and debt sustainability

Masaya Sakuragawa, Yukie Sakuragawa

Research output: Contribution to journalArticle

Abstract

This paper reconsiders Japan's fiscal sustainability. We investigate whether a simulation conducted under the political constraint imposed by a fiscal reaction function supports the official projection. First, we obtain Japan's fiscal reaction function by estimating the response of the primary surpluses to the past debt for a panel data set of 23 OECD countries. Next, we investigate the political feasibility of the official projection using our estimated reaction function. When the Cabinet Office criterion is used for the debt-to-GDP ratio, the government can attain the policy target of nonnegative fiscal surpluses and realize fiscal sustainability. Notably, the negative growth-adjusted bond yield and the high growth rate contribute to this finding.

Original languageEnglish
Article number101010
JournalJapan and The World Economy
Volume54
DOIs
Publication statusPublished - 2020 Jun

Keywords

  • Fiscal projection
  • Government debt
  • Primary surpluses
  • Sustainability

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations

Fingerprint Dive into the research topics of 'Government fiscal projection and debt sustainability'. Together they form a unique fingerprint.

  • Cite this