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The Macroeconomic Experience of Japan Since 1990: An Emprirical Investigation

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  • McKibbin, W.J.

Abstract

This paper outlines the macroeconomic experiences of the Japanese economy since 1990. The MSG2 multi-country model is used to determine the extent to which the strong yen and growth experience of Japan over this period was due to underlying trends in the Japanese economy and to what extent shocks such as changes in the settings of monetary and fiscal policies in Japan and overseas, as well as the Kobe earthquake, played a role. It is shown that many of the key features of the Japanese economy over this period can be attributed to inappropriate macroeconomic policy settings in Japan as well as reflecting long term trends due to population changes and a maturing of the Japanese economy. In particular, it is shown that announcing expansionary fiscal policy in advance of implementation and exaggerating the extent of actual stimulus, tended to appreciate the yen and raise long term real interest rates which further reduced real GDP growth over the period.

Suggested Citation

  • McKibbin, W.J., 1996. "The Macroeconomic Experience of Japan Since 1990: An Emprirical Investigation," Papers 131, Brookings Institution - Working Papers.
    • Handle: RePEc:fth:brooki:131
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    Cited by:

    1. Alan J. Auerbach & William G. Gale, 2009. "Activist fiscal policy to stabilize economic activity," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 327-374.
    2. Werner, Richard A., 2011. "The unintended consequences of the debt: Will increased government expenditure hurt the economy?," CFS Working Paper Series 2011/26, Center for Financial Studies (CFS).

    More about this item

    Keywords

    ECONOMIC POLICY ; ECONOMIC MODELS ; ECONOMIC GROWTH;
    All these keywords.

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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