A Numerical Evaluation on a Sustainable Size of Primary Deficit in Japan

Real Arai and Junji Ueda ()
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Junji Ueda: Policy Research Institute, Ministry of Finance Japan

No 823, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: We investigate how large a size of primary deficit to GDP ratio the 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 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)
Pages: 30
Date: 2012-06
New Economics Papers: this item is included in nep-dge, nep-fdg, nep-mac and nep-pub
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: A numerical evaluation of the sustainable size of the primary deficit in Japan (2013)
Working Paper: A Numerical Evaluation on a Sustainable Size of Primary Deficit in Japan (2012)
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