Fiscal Remedies for Japan's Slump

Laurence Ball

NBER Working Paper No. 11374
Issued in May 2005
NBER Program(s):   EFG   ME   PE

This paper asks how a fiscal expansion would affect Japan. It uses a textbook-style macro model calibrated to fit the Japanese economy. According to the results, Japan’s output slump would be ended by a fiscal transfer of 6.6% of GDP. This policy raises the debt-income ratio in the short run, but it reduces this ratio in the long run through higher inflation and tax revenue. The financing of the transfer -- bonds or money -- affects debt in the short run but not the long run.

(379 K)

Published:

• Laurence M. Ball, 2006. "Fiscal Remedies for Japan’s Slump," NBER Chapters, in: Monetary Policy under Very Low Inflation in the Pacific Rim, NBER-EASE, Volume 15, pages 279-306 National Bureau of Economic Research, Inc. ,
• Ball, Laurence. "Fiscal Remedies for Japan's Slump." Monetary Policy with Very Low Inflation in the Pacific Rim. (2006): 279-304.

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