Monetary, fiscal and demographic interactions in Japan: impact and a comparative assessment

Macroeconomic models used to downplay demographic and fiscal factors. For Japan, narratives suggest that its experience is unlike that of other large economies persisted. I revisit how demographic and fiscal shocks impact Japan, the Euro Area and the US since 1990. Several models and methodologies are used to investigate macro-financial factors, including demographic and fiscal variables. Many, but not all, of the shocks examined have comparable impact across all three economies considered. This is true for monetary policy and the response of global inflation to ageing and demographic shocks. The response of real economic activity to several of the shocks considered is also comparable. Perhaps most notably, demographic and fiscal factors have significant real economic impact although the size of the response does differ across the three economies examined. Japan may not be like other systemically important economies in all respects but it does offer lessons for other large economies.