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Policies and Prospects in Japan and the Implications for the Asia-Pacific Region

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  • Tim Callen
  • Warwick J. McKibbin

Abstract

This paper uses the G-Cubed (Asia-Pacific) model-a macroeconomic model with rich cross-country links-to explore the implications for Japan and Asia of several shocks to the Japanese economy. The results suggest that, while fiscal consolidation in Japan would initially dampen domestic growth, over the medium term the impact on both the domestic and regional economies would be positive. Quantitative monetary easing in Japan would boost domestic activity in the short-run, while being basically neutral for the region. Finally, a loss of confidence in the yen would be negative for Japan, but positive for the region because of a reallocation of capital flows toward non-Japan Asia.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 01/131.

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Length: 57
Date of creation: 01 Sep 2001
Date of revision:
Handle: RePEc:imf:imfwpa:01/131

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References

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  1. Fumio Hayashi & Edward C. Prescott, 2002. "The 1990s in Japan: A Lost Decade," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 206-235, January.
  2. Yoshikawa, Hiroshi, 2000. "Technical Progress and the Growth of the Japanese Economy--Past and Future," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 16(2), pages 34-45, Summer.
  3. Boltho, Andrea & Corbett, Jenny, 2000. "The Assessment: Japan's Stagnation--Can Policy Revive the Economy?," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 16(2), pages 1-17, Summer.
  4. Hayashi, Fumio, 1982. "Tobin's Marginal q and Average q: A Neoclassical Interpretation," Econometrica, Econometric Society, Econometric Society, vol. 50(1), pages 213-24, January.
  5. Robert E. Lucas & Jr., 1967. "Adjustment Costs and the Theory of Supply," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 75, pages 321.
  6. Adam S. Posen, 1998. "Restoring Japan's Economic Growth," Peterson Institute Press: All Books, Peterson Institute for International Economics, Peterson Institute for International Economics, number 35, July.
  7. Bayoumi, Tamim & Lipworth, Gabrielle, 1998. "Japanese foreign direct investment and regional trade," Journal of Asian Economics, Elsevier, Elsevier, vol. 9(4), pages 581-607.
  8. Akira Kohsaka, 1996. "Interdependence through Capital Flows in Pacific Asia and the Role of Japan," NBER Chapters, National Bureau of Economic Research, Inc, in: Financial Deregulation and Integration in East Asia, NBER-EASE Volume 5, pages 107-146 National Bureau of Economic Research, Inc.
  9. McKibbin, Warwick J & Vines, David, 2000. "Modelling Reality: The Need for Both Inter-temporal Optimization and Stickiness in Models for Policy-Making," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 16(4), pages 106-37, Winter.
  10. Uzawa, H, 1969. "Time Preference and the Penrose Effect in a Two-Class Model of Economic Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 77(4), pages 628-52, Part II, .
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Cited by:
  1. Hsiao, Frank S. T. & Hsiao, Mei-chu W. & Yamashita, Akio, 2003. "The impact of the US economy on the Asia-Pacific region: does it matter?," Journal of Asian Economics, Elsevier, Elsevier, vol. 14(2), pages 219-241, April.
  2. Ronald McKinnon & Gunther Schnabl, 2002. "Synchronized Business Cycles in East Asia: Fluctuations in the Yen/Dollar Exchange Rate and China’s Stabilizing Role," Working Papers, Stanford University, Department of Economics 02010, Stanford University, Department of Economics.
  3. Ronald McKinnon & Gunther Schnabl, 2003. "Synchronised Business Cycles in East Asia and Fluctuations in the Yen/Dollar Exchange Rate," The World Economy, Wiley Blackwell, Wiley Blackwell, vol. 26(8), pages 1067-1088, 08.
  4. Bartosz Mackowiak, 2005. "What does the Bank of Japan do to East Asia?," SFB 649 Discussion Papers SFB649DP2005-059, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.

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