A numerical evaluation of the sustainable size of the primary deficit in Japan
AbstractWe investigate how large a primary deficit-to-GDP ratio Japan’s government can sustain. For this investigation, we construct an overlapping generations model in which multi-generational households live and the government maintains a constant ratio of the primary deficit to GDP. We numerically show that the primary deficit cannot be sustained unless the rate of economic growth is unrealistically high, which is more than five percent according to our settings. Our result implies that Japan’s government needs to achieve a positive primary balance in the long run in order to avoid the divergence of the public debt-to-GDP ratio.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of the Japanese and International Economies.
Volume (Year): 30 (2013)
Issue (Month): C ()
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Web page: http://www.elsevier.com/locate/inca/622903
Fiscal sustainability; Public debt; Primary deficit; Economic growth;
Other versions of this item:
- Real Arai & Junji Ueda, 2012. "A Numerical Evaluation on a Sustainable Size of Primary Deficit in Japan," KIER Working Papers 823, Kyoto University, Institute of Economic Research.
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
- H68 - Public Economics - - National Budget, Deficit, and Debt - - - Forecasts of Budgets, Deficits, and Debt
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