 Seigniorage and Japanese fiscal sustainability: Simulation analysis using an overlapping generations modelReona Hagiwara Economic Modelling, 2020, vol. 84, issue C, 340-356 Abstract: This study examines two tax policies for achieving fiscal sustainability in Japan: (i) an increase in consumption tax and (ii) consumption tax hike combined with inflation. To evaluate these policies from both fiscal and welfare perspectives, I develop a multi-period overlapping generations model with money. The results reveal that, compared to the first policy, the second policy can substantially delay the timing of and curb the increase in consumption tax through seigniorage revenue. This suggests seigniorage could be a useful tool for the Japanese government in resolving its fiscal problems. In addition, in an aging Japan, the second policy can enhance future generations’ utility. Because inflation reduces money holdings and utility of the elderly, policies that cause inflation in the present but reduce it in the future improve the utility of future generations. From a social welfare viewpoint, such policies are desirable in a government that has foresight. Keywords: Japanese fiscal sustainability; Inflation rate; Seigniorage revenue; Money in the utility; Overlapping generations model (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:eee:ecmode:v:84:y:2020:i:c:p:340-356 DOI: 10.1016/j.econmod.2019.04.024 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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