Working Paper: NBER ID: w11374
Authors: Laurence Ball
Abstract: This paper asks how a fiscal expansion would affect Japan. It uses a textbook-style macro model calibrated to fit the Japanese economy. According to the results, Japan's output slump would be ended by a fiscal transfer of 6.6% of GDP. This policy raises the debt-income ratio in the short run, but it reduces this ratio in the long run through higher inflation and tax revenue. The financing of the transfer -- bonds or money -- affects debt in the short run but not the long run.
Keywords: No keywords provided
JEL Codes: E3; E6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Fiscal transfer of 6.6% of GDP (H69) | Output recovery (C67) |
| Fiscal transfer (H87) | Debt-income ratio (F34) |
| Output and inflation rise (E31) | Debt-income ratio (F34) |
| Financing through money (G32) | Debt-income ratio (F34) |
| Fiscal expansion (E62) | Improved long-run fiscal outlook (H68) |
| Fiscal expansion (E62) | Output slump addressed (E32) |