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A numerical evaluation of the sustainable size of the primary deficit in Japan

Real Arai and Junji Ueda

Journal of the Japanese and International Economies, 2013, vol. 30, issue C, 59-75

Abstract: We investigate how large a primary deficit-to-GDP ratio Japan’s government can sustain. For this investigation, we construct an overlapping generations model in which multi-generational households live and the government maintains a constant ratio of the primary deficit to GDP. We numerically show that the primary deficit cannot be sustained unless the rate of economic growth is unrealistically high, which is more than five percent according to our settings. Our result implies that Japan’s government needs to achieve a positive primary balance in the long run in order to avoid the divergence of the public debt-to-GDP ratio.

Keywords: Fiscal sustainability; Public debt; Primary deficit; Economic growth (search for similar items in EconPapers)
JEL-codes: E62 H62 H63 H68 (search for similar items in EconPapers)
Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (13)

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Working Paper: A Numerical Evaluation on a Sustainable Size of Primary Deficit in Japan (2012) Downloads
Working Paper: A Numerical Evaluation on a Sustainable Size of Primary Deficit in Japan (2012) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jjieco:v:30:y:2013:i:c:p:59-75

DOI: 10.1016/j.jjie.2013.10.003

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