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Public Investment as a Fiscal Stimulus; Evidence from Japan’s Regional Spending During the 1990s

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  • Anita Tuladhar
  • Markus Bruckner

Abstract

How effective was public investment in stimulating the Japanese economy during the economic stagnation of the 1990s? Using a dataset of regional public investment spending, we find that investment multipliers were higher than for public consumption, although they were relatively low and declining over time. The paper also finds that the effectiveness of economic infrastructure investment, implemented mainly by the central government, is lower than that of social investment mostly undertaken by local governments. These results suggest that while public investment may yield higher output effects than other spending, its effectiveness depends upon its composition, the level of government implementation, and supply side factors.

Suggested Citation

  • Anita Tuladhar & Markus Bruckner, 2010. "Public Investment as a Fiscal Stimulus; Evidence from Japan’s Regional Spending During the 1990s," IMF Working Papers 10/110, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:10/110
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    Cited by:

    1. El-Baz, Osama, 2014. "Is there a need for a Marshall plan in the Egyptian economy? An investigation of the fiscal stimulus package," MPRA Paper 69717, University Library of Munich, Germany, revised 16 Mar 2014.
    2. Naoyuki Yoshino & Umid Abidhadjaev, 2015. "An Impact Evaluation of Investment in Infrastructure : The Case of the Railway Connection in Uzbekistan," Working Papers id:7743, eSocialSciences.
    3. Yoshito Funashima, 2012. "The effects of public investment smoothing as a stimulus measure on construction industry in Japan," Economics Bulletin, AccessEcon, vol. 32(3), pages 1992-2006.
    4. Tomomi Miyazaki, 2016. "Interactions between Regional Public and Private Investment: Evidence from Japanese Prefectures," Discussion Papers 1608, Graduate School of Economics, Kobe University.
    5. Funashima, Yoshito, 2014. "Macroeconomic policy coordination between Japanese central and local governments," MPRA Paper 59821, University Library of Munich, Germany.
    6. Bessho, Shun-ichiro, 2016. "Case Study of Central and Local Government Finance in Japan," ADBI Working Papers 599, Asian Development Bank Institute.
    7. Luigi Bonatti, 2016. "Anemic economic growth in advanced economies: structural factors and the impotence of expansionary macroeconomic policies," DEM Working Papers 2016/11, Department of Economics and Management.
    8. Funashima, Yoshito & Horiba, Isao & Miyahara, Shoichi, 2015. "Local Government Investments and Ineffectiveness of Fiscal Stimulus during Japan's Lost Decades," MPRA Paper 61333, University Library of Munich, Germany.

    More about this item

    Keywords

    Economic models; Financial crisis; Fiscal policy; Japan; Governance; Government expenditures; Public investment; fiscal multipliers; private investment; government expenditure; Fiscal Policies and Behavior of Economic Agents: General;

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