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The Effect of Government Purchases on Economic Growth in Japan

Author

Listed:
  • Federico Guerrero

    () (Department of Economics, University of Nevada, Reno)

  • Elliott Parker

    () (Department of Economics, University of Nevada, Reno)

Abstract

We consider whether there is statistical evidence for a causal relationship between government expenditures and real GDP growth in postwar Japan. After studying the time-series properties of these variables, we find that government consumption and government investment both have a positive and causal effect on growth. This suggests that fiscal policy may not have been as ineffective during the last two decades of Japan’s stagnant growth as some have suggested, but may have helped to prevent an even more severe balance-sheet recession after the collapse of the Japanese bubble economy.

Suggested Citation

  • Federico Guerrero & Elliott Parker, 2010. "The Effect of Government Purchases on Economic Growth in Japan," Working Papers 10-004, University of Nevada, Reno, Department of Economics;University of Nevada, Reno , Department of Resource Economics.
  • Handle: RePEc:unr:wpaper:10-004
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    File URL: http://www.coba.unr.edu/econ/wp/papers/UNRECONWP10004.pdf
    File Function: First version, 2010
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    References listed on IDEAS

    as
    1. Cheung, Yin-Wong & Chinn, Menzie David, 1996. "Deterministic, Stochastic, and Segmented Trends in Aggregate Output: A Cross-Country Analysis," Oxford Economic Papers, Oxford University Press, vol. 48(1), pages 134-162, January.
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    Cited by:

    1. Girardin, Eric & Moussa, Zakaria, 2011. "Quantitative easing works: Lessons from the unique experience in Japan 2001â2006," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(4), pages 461-495, October.
    2. Moayedi, Vafa & Aminfard, Matin, 2011. "The Impact of Policy Shocks on Financial Structure: Empirical Results from Japan," MPRA Paper 39185, University Library of Munich, Germany.

    More about this item

    Keywords

    Long-term economic growth; Japan; Government size; Cointegration; Granger causality; Vector autoregression; Vector error correction model;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • F39 - International Economics - - International Finance - - - Other

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