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Decomposing local fiscal multipliers: Evidence from Japan

Taisuke Kameda, Ryoichi Namba and Takayuki Tsuruga ()

Japan and the World Economy, 2021, vol. 57, issue C

Abstract: Recent studies on fiscal policy use cross-sectional data and estimate local fiscal multipliers along with spillovers. This paper estimates local fiscal multipliers with spillovers using Japanese prefectural data comparable with the national accounts. We estimate the local fiscal multiplier on output to be 1.7 at the regional level. We decompose the regional fiscal multiplier into the prefectural fiscal multiplier and the region-wide effect. Converting the latter component into the spillover, we find that the spillover is positive and small in size. We also decompose the regional fiscal multiplier on output into multipliers on the expenditure components. Our estimates suggest that there are crowding-in effects of government spending on consumption and investment. Moreover, we find that the regional fiscal multiplier on absorption exceeds 2.0 and that the spillover to absorption is considerable in contrast to the spillover to output.

Keywords: Fiscal stimulus; Spillover; Geographic cross-sectional fiscal multiplier (search for similar items in EconPapers)
JEL-codes: E62 H30 R50 (search for similar items in EconPapers)
Date: 2021
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Working Paper: Decomposing Local Fiscal Multipliers: Evidence from Japan (2019) Downloads
Working Paper: Decomposing Local Fiscal Multipliers: Evidence from Japan (2019) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:57:y:2021:i:c:s0922142521000013

DOI: 10.1016/j.japwor.2021.101053

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