Impact of fiscal policies on the labor market with search friction: An estimated DSGE model for Japan

Zhenkun Lu and Keigo Kameda

Journal of the Japanese and International Economies, 2024, vol. 72, issue C

Abstract: This study investigates the effects of heterogenous fiscal policies on Japan's labor market amidst increasing national debt and economic downturns. We develop a Dynamic Stochastic General Equilibrium model incorporating labor market search friction, staggered wage negotiation, price stickiness and productive government employment. This model is used to compare the impacts of multiple fiscal policies—including government employment spendings, direct government expenditures, and tax cuts—on employment. The model, estimated with macroeconomic data of Japan spanning 1985 to 2019, offers a detailed look at how fiscal policies influence employment dynamics.

Keywords: Fiscal policy; Dynamic Stochastic General Equilibrium (DSGE) model; Labor market frictions; The Japanese economy; Unemployment (search for similar items in EconPapers)
JEL-codes: E12 E62 J20 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jjieco:v:72:y:2024:i:c:s088915832400011x

DOI: 10.1016/j.jjie.2024.101315

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