 Productivity and Fiscal Policy in Japan: Short Term Forecasts from the Standard Growth ModelSelahattin Imrohoroglu and Nao Sudo No 10-E-23, IMES Discussion Paper Series from Institute for Monetary and Economic Studies, Bank of Japan Abstract: Japan is facing severe fiscal challenges. The aging of the population is projected to raise total pension and health expenditures. There is already a huge debt to output ratio which is the highest in advanced economies. In this paper we ask `if the consumption tax rate is raised to 15%, will there be a primary surplus, and what factors are important in achieving a fiscal balance?' Using the standard growth model 's simulations as `modern back-of-the-envelope' calculations, the quantitative findings indicate the critical need to contain government expenditures. Even an annual growth rate of 3% in GDP over the next 20 years may be insufficient to turn consistent primary surpluses, combined with a new consumption tax rate of 15%, unless prudent expenditure policies are implemented. Keywords: Primary Balance; Fiscal Policy; Productivity; Growth Theory (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ime:imedps:10-e-23 Access Statistics for this paper More papers in IMES Discussion Paper Series from Institute for Monetary and Economic Studies, Bank of Japan Contact information at EDIRC. |
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