Fiscal sustainability in Japan

Masaya Sakuragawa, Kaoru Hosono

研究成果: Article査読

19 被引用数 (Scopus)

抄録

This paper investigates fiscal sustainability of Japan by providing a dynamic stochastic general equilibrium (DSGE) model that features the low interest rate of the government bond relative to the economic growth rate to mimic the actual data. We evaluate fiscal sustainability by investigating whether the expected path of the debt-to-GDP ratio stabilizes or increases without bound. The debt-to-GDP ratio depends crucially on the projected growth rate and the fiscal policy rule. If the government does not react to the current fiscal crisis, the debt-to-GDP ratio will increase without bound, and then the fiscal policy is not sustainable. If the fiscal rule uses Bohn's (1998) idea that involves the response of the primary surplus to the debt, sustainability improves. This rule provides a useful and realistic reform plan in the short and long runs.

本文言語English
ページ(範囲)434-446
ページ数13
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 1

ASJC Scopus subject areas

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

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