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Expansionary Effect of an Anticipated Fiscal Policy on Consumption in Japan

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  • Hiroshi Morita
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    Abstract

    This paper investigates the effect of an anticipated fiscal policy on consumption in Japan. I identify an anticipated increment in public investment by using the excess stock returns on the construction industry and by applying the sign restriction VAR. The result shows that GDP and consumption respond to a public investment shock positively. Further, I demonstrate that the empirical facts are consistent with the New Keynesian model that has a high elasticity of labor supply and a large share of Non-Ricardians.

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    File URL: http://gcoe.ier.hit-u.ac.jp/research/discussion/2008/pdf/gd11-219.pdf
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    Bibliographic Info

    Paper provided by Institute of Economic Research, Hitotsubashi University in its series Global COE Hi-Stat Discussion Paper Series with number gd11-219.

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    Date of creation: Jan 2012
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    Handle: RePEc:hst:ghsdps:gd11-219

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    Related research

    Keywords: Fiscal Policy; Fiscal Foresight; Sign Restriction VAR;

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    1. Andrea Colciago, 2011. "Rule‐of‐Thumb Consumers Meet Sticky Wages," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 325-353, 03.
    2. Mertens, Karel & Ravn, Morten O., 2009. "Measuring the Impact of Fiscal Policy in the Face of Anticipation: A Structural VAR Approach," CEPR Discussion Papers 7423, C.E.P.R. Discussion Papers.
    3. Jonas D. M. Fisher & Ryan Peters, 2009. "Using stock returns to identify government spending shocks," Working Paper Series WP-09-03, Federal Reserve Bank of Chicago.
    4. Miki Kohara & Charles Yuji Horioka, 2006. "Do Borrowing Constraints Matter? An Analysis of Why the Permanent Income Hypothesis Does Not Apply in Japan," ISER Discussion Paper 0663, Institute of Social and Economic Research, Osaka University.
    5. Sugo, Tomohiro & Ueda, Kozo, 2008. "Estimating a dynamic stochastic general equilibrium model for Japan," Journal of the Japanese and International Economies, Elsevier, vol. 22(4), pages 476-502, December.
    6. Manishi Prasad & Peter Wahlqvist & Rich Shikiar & Ya-Chen Tina Shih, 2004. "A," PharmacoEconomics, Springer Healthcare | Adis, vol. 22(4), pages 225-244.
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