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The Domestic and Global Impact of Japan's Policies for Growth

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Author Info

  • Nicoletta Batini
  • Alessandro Rebucci
  • Papa M'B. P. N'Diaye

Abstract

Japan is facing a sizable fiscal imbalance against a backdrop of weak trend growth and growing external imbalances in the world economy. This paper examines the possible impact of fiscal adjustment and productivity-enhancing structural reforms on the Japanese and world economies. Simulation results indicate that these could reduce substantially Japan''s fiscal imbalance with only limited spillovers to the rest of the world. Specifically, faster productivity growth would help lower Japan''s debt and limit the tendency of fiscal consolidation to increase the external surplus. In fact, very rapid productivity growth could potentially lead to a decline in Japan''s external surplus and thereby have a positive effect on global imbalance. The modest extent of the spillovers to the rest of the world reflect the small size of the shocks and the diminished size of Japan in the world economy.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/209.

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Length: 22
Date of creation: 01 Nov 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/209

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Keywords: Fiscal consolidation; Economic growth; External debt; Fiscal management; current account; world economy; government debt; current account surplus; intermediate goods; domestic demand; output growth; elasticity of substitution; investment goods; trade deficit; domestic prices; domestic goods; domestic firms; tradable goods; current account deficit; public debt; imported goods; current account balance; current account surpluses; public finances; net exports; central bank; export growth; international trade; reserve bank; current account adjustment; net debtors; nontradable goods; current accounts; nominal interest rate; long-term debt; closed economy; imported intermediate; distortionary taxes; government deficit; adjustment process; commodity trade; transmission of shocks; open economy; balance sheet effects;

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References

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  1. Hamid Faruqee & Douglas Laxton & Dirk Muir & Paolo A. Pesenti, 2007. "Smooth Landing or Crash? Model-Based Scenarios of Global Current Account Rebalancing," NBER Chapters, in: G7 Current Account Imbalances: Sustainability and Adjustment, pages 377-456 National Bureau of Economic Research, Inc.
  2. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2005. "A Global Perspective on External Positions," CEPR Discussion Papers 5234, C.E.P.R. Discussion Papers.
  3. Tim Callen & Warwick J. McKibbin & Nicoletta Batini, 2006. "The Global Impact of Demographic Change," IMF Working Papers 06/9, International Monetary Fund.
  4. International Monetary Fund, 2005. "Net Foreign Asset Positions and Consumption Dynamics in the International Economy," IMF Working Papers 05/82, International Monetary Fund.
  5. repec:tcd:wpaper:tep16 is not listed on IDEAS
  6. Peter Isard & Hamid Faruqee, 1998. "Exchange Rate Assessment," IMF Occasional Papers 167, International Monetary Fund.
  7. Hamid Faruqee & Douglas Laxton & Bart Turtelboom & Peter Isard & Eswar Prasad, 1998. "Multimod Mark III," IMF Occasional Papers 164, International Monetary Fund.
  8. Juillard, Michel & Karam, Philippe & Laxton, Douglas & Pesenti, Paolo, 2006. "Welfare-based monetary policy rules in an estimated DSGE model of the US economy," Working Paper Series 0613, European Central Bank.
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Cited by:
  1. Douglas Laxton & Papa N'Diaye & Paolo Pesenti, 2006. "Deflationary shocks and monetary rules: an open-economy scenario analysis," Staff Reports 267, Federal Reserve Bank of New York.
  2. Massimiliano Pisani & Pietro Cova & Alessandro Rebucci, 2009. "Global Imbalances," IMF Working Papers 09/64, International Monetary Fund.
  3. Dora M. Iakova & Dennis P. J. Botman, 2007. "Policy Challenges of Population Aging in Ireland," IMF Working Papers 07/247, International Monetary Fund.
  4. Dennis P. J. Botman & Papa M'B. P. N'Diaye & Hali J. Edison, 2007. "Strategies for Fiscal Consolidation in Japan," IMF Working Papers 07/37, International Monetary Fund.
  5. Forni, L. & Gerali, A. & Pisani, M., 2010. "Macroeconomic Effects Of Greater Competition In The Service Sector: The Case Of Italy," Macroeconomic Dynamics, Cambridge University Press, vol. 14(05), pages 677-708, November.
  6. Dennis P. J. Botman & Stephan Danninger, 2007. "Tax Reform and Debt Sustainability in Germany," IMF Working Papers 07/46, International Monetary Fund.
  7. Malhar Nabar, 2011. "Targets, Interest Rates, and Household Saving in Urban China," IMF Working Papers 11/223, International Monetary Fund.
  8. Manmohan S. Kumar & Dennis P. J. Botman, 2007. "Global Aging Pressures," IMF Working Papers 07/196, International Monetary Fund.

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