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Macroeconomic policy coordination between Japanese central and local governments

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  • Yoshito Funashima

    (Tohoku Gakuin University)

Abstract

It is commonly believed that public investments play a central role in Japan’s discretionary fiscal policies, but the majority is implemented by local governments. After distinguishing between public investment by the central government and that by local governments, this paper utilizes wavelet techniques to examine macroeconomic policy coordination between Japanese central and local governments. We demonstrate that local government investments fail to coordinate with central government investments during the lost two decades, and such a coordination failure is a one-time phenomenon in nearly a half-century. In this period, local government investments exhibit no countercyclical behavior to business cycles, which is contributory to the ineffectiveness of fiscal stimulus that is pointed out by our predecessors.

Suggested Citation

  • Yoshito Funashima, 2018. "Macroeconomic policy coordination between Japanese central and local governments," Empirical Economics, Springer, vol. 54(4), pages 1631-1651, June.
    • Handle: RePEc:spr:empeco:v:54:y:2018:i:4:d:10.1007_s00181-017-1275-9
    DOI: 10.1007/s00181-017-1275-9
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    More about this item

    Keywords

    Public investment; Wavelet; Central government; Local government;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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