Fiscal policy switching in Japan, the US, and the UK

Arata Ito, Tsutomu Watanabe, Tomoyoshi Yabu

研究成果: Article査読

15 被引用数 (Scopus)

抄録

This paper estimates fiscal policy feedback rules in Japan, the United States, and the United Kingdom for more than a century, allowing for stochastic regime changes. Estimating a Markov-switching model by the Bayesian method, we find the following: First, the Japanese data clearly reject the view that the fiscal policy regime is fixed, i.e., that the Japanese government adopted a Ricardian or a non-Ricardian regime throughout the entire period. Instead, our results indicate a stochastic switch of the debt-GDP ratio between stationary and nonstationary processes, and thus a stochastic switch between Ricardian and non-Ricardian regimes. Second, our simulation exercises using the estimated parameters and transition probabilities do not necessarily reject the possibility that the debt-GDP ratio may be nonstationary even in the long run (i.e., globally nonstationary). Third, the Japanese result is in sharp contrast with the results for the US and the UK which indicate that in these countries the government's fiscal behavior is consistently characterized by Ricardian policy.

本文言語English
ページ(範囲)380-413
ページ数34
ジャーナルJournal of The Japanese and International Economies
25
4
DOI
出版ステータスPublished - 2011 12

ASJC Scopus subject areas

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

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