TY - JOUR
T1 - Government fiscal projection and debt sustainability
AU - Sakuragawa, Masaya
AU - Sakuragawa, Yukie
N1 - Publisher Copyright:
© 2020 Elsevier B.V.
Copyright:
Copyright 2020 Elsevier B.V., All rights reserved.
PY - 2020/6
Y1 - 2020/6
N2 - 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.
AB - 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.
KW - Fiscal projection
KW - Government debt
KW - Primary surpluses
KW - Sustainability
UR - http://www.scopus.com/inward/record.url?scp=85084418158&partnerID=8YFLogxK
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U2 - 10.1016/j.japwor.2020.101010
DO - 10.1016/j.japwor.2020.101010
M3 - Article
AN - SCOPUS:85084418158
VL - 54
JO - Japan and the World Economy
JF - Japan and the World Economy
SN - 0922-1425
M1 - 101010
ER -