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The Impact of Fiscal Consolidation and Structural Reformson Growth in Japan

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  • Pelin Berkmen

Abstract

With Japan’s public debt reaching historical levels, the need for fiscal consolidation and structural reforms have increased. As fiscal consolidation will require a sustained and large adjustment in the fiscal balance, its growth effect is a concern particularly for the short run. This paper uses the IMF’s Global Integrated Monetary and Fiscal Model to analyze the growth impact of fiscal consolidation and structural reforms. Although fiscal consolidation has short-term costs, the potential long-term benefits are considerable, and reforms that raise potential growth could support consolidation. Simulations show that the external environment also matters but domestic policies should be the priority.

Suggested Citation

  • Pelin Berkmen, 2011. "The Impact of Fiscal Consolidation and Structural Reformson Growth in Japan," IMF Working Papers 11/13, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:11/13
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=24574
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    References listed on IDEAS

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    1. Kozo Kiyota & Takanobu Nakajima & Kiyohiko G. Nishimura, 2009. "Measurement of the market power of firms: the Japanese case in the 1990s," Industrial and Corporate Change, Oxford University Press, vol. 18(3), pages 381-414, June.
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    1. repec:vrs:tejoae:v:13:y:2016:i:2:p:21-29:n:4 is not listed on IDEAS

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