A Numerical Evaluation on a Sustainable Size of Primary Deficit in Japan
AbstractWe investigate how large a size of primary deficit to GDP ratio the 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 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 InfoPaper provided by Policy Research Institute, Ministry of Finance Japan in its series Discussion papers with number ron235.
Length: 30 pages
Date of creation: Jun 2012
Date of revision:
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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-23 (All new papers)
- NEP-DGE-2012-07-23 (Dynamic General Equilibrium)
- NEP-FDG-2012-07-23 (Financial Development & Growth)
- NEP-MAC-2012-07-23 (Macroeconomics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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