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What causes changes in the effects of fiscal policy? A case study of Japan

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  • Kameda, Keigo

Abstract

In the past two decades, the Japanese government has spent a considerable amount of money to counteract the severe recessions that have recurred since the early 1990s. Numerous studies have pointed out that the effects of these expenditures have diminished since around the 1990s. However, none of these studies has statistically explored the reasons for this diminution, which they implicitly or explicitly mention. The purpose of this study is to statistically investigate these reasons, using a threshold vector autoregression (VAR) in which the causes pointed out in the literature are adopted as the threshold. If the null hypothesis that the estimated parameters are equal under each regime is rejected, we can conclude that a given cause does affect the macroeconomic structure and, in turn, the fiscal policy effects. We then estimate the impulse response functions in both sample periods, as constructed on the basis of threshold estimates, and compare the effects of fiscal policy in each period.

Suggested Citation

  • Kameda, Keigo, 2014. "What causes changes in the effects of fiscal policy? A case study of Japan," Japan and the World Economy, Elsevier, vol. 31(C), pages 14-31.
  • Handle: RePEc:eee:japwor:v:31:y:2014:i:c:p:14-31
    DOI: 10.1016/j.japwor.2014.04.003
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Tomomi Miyazaki, 2016. "Fiscal stimulus effectiveness in Japan: evidence from recent policies," Applied Economics, Taylor & Francis Journals, vol. 48(27), pages 2506-2515, June.
    2. Ryu-ichiro Murota & Yoshiyasu Ono, 2015. "Fiscal Policy under Long-run Stagnation: A New Interpretation of the Multiplier Effect," ISER Discussion Paper 0937, Institute of Social and Economic Research, Osaka University.
    3. Morita, Hiroshi, 2015. "State-dependent effects of fiscal policy in Japan: Do rule-of-thumb households increase the effects of fiscal policy?," Journal of Macroeconomics, Elsevier, vol. 43(C), pages 49-61.
    4. repec:bla:manchs:v:87:y:2019:i:5:p:724-749 is not listed on IDEAS
    5. Tomomi Miyazaki, 2015. "Fiscal Stimulus Effectiveness in Japan: Evidence from Recent Policies," Discussion Papers 1508, Graduate School of Economics, Kobe University.
    6. Jun‐Hyung Ko & Hiroshi Morita, 2019. "Regime Switches in Japan's Fiscal Policy: Markov‐Switching VAR Approach," Manchester School, University of Manchester, vol. 87(5), pages 724-749, September.
    7. Olorunfemi Yasiru ALIMI & Olumuyiwa Ganiyu YINUSA & Ishola Rufus AKINTOYE & Olalekan Bashir AWORINDE, 2015. "Macroeconomic Effects of Fiscal Policy Changes in Nigeria," The Journal of Accounting and Management, Danubius University of Galati, issue 3, pages 85-94, December.
    8. repec:wsi:jicepx:v:09:y:2018:i:01n02:n:s1793993318500047 is not listed on IDEAS
    9. Murota, Ryu-ichiro & Ono, Yoshiyasu, 2015. "Fiscal policy under deflationary gap and long-run stagnation: Reinterpretation of Keynesian multipliers," Economic Modelling, Elsevier, vol. 51(C), pages 596-603.
    10. Wissem Khanfir, 2016. "Threshold effect of fiscal policy on private consumption : Evidence from Tunisia," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 18(59), pages 95-110, March.

    More about this item

    Keywords

    Threshold vector autoregression; Fiscal policy; Demand enhancing effect; Financial stress; Non-Keynesian effect;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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