The optimum quantity of debt for an aging Japan: welfare and demographic dynamics

Akira Okamoto ()
Additional contact information
Akira Okamoto: Okayama University

The Japanese Economic Review, 2025, vol. 76, issue 1, No 1, 52 pages

Abstract: Abstract Japan’s government is heavily indebted, and the current net debt tends to increase. This paper uses an extended life-cycle general equilibrium model with endogenous fertility to investigate an optimal size of government debt from two viewpoints: individual welfare and future demographic dynamics. A simulation analysis finds that the level of net government debt, which maximizes per-capita utility, is negative at − 220% of Japan’s gross domestic product (GDP). The results also indicate that the net debt-to-GDP ratio of − 220% produces a considerable per-capita welfare gain; however, compared to the baseline simulation with a debt-to-GDP ratio of 150%, it substantially decreases the total population in the long run.

Keywords: Government debt; Welfare; Demographic dynamics; Japanese economy; Simulation analysis (search for similar items in EconPapers)
JEL-codes: C68 H30 (search for similar items in EconPapers)
Date: 2025
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s42973-024-00156-7 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jecrev:v:76:y:2025:i:1:d:10.1007_s42973-024-00156-7

Ordering information: This journal article can be ordered from
https://www.springer.com/journal/42973

DOI: 10.1007/s42973-024-00156-7

Access Statistics for this article

The Japanese Economic Review is currently edited by Michihiro Kandori

More articles in The Japanese Economic Review from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().