Overall Picture and Structure of the Fiscal Economic Model

Nobutoshi Kitaura, Junji Ueda, Shintaro Nakagawa, Daisuke Nishino, Tatsuya Sugiura, Kun Kawaguchi, Motokazu Sakamura, Tetsutaro Ohmatsu, Noriyoshi Nagumo, Syohei Kyotani, Takuto Nagashima, Kensaku Morita, Tatsuo Sakamoto, Ryo Ishida, Takaki Hojo and Yoko Masui
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Nobutoshi Kitaura: Economist, Policy Research Institute, Ministry of Finance; Former Director of Policy Evaluation Office, Ministry of Finance; Former Associate Professor, Institute of Economic Research, Kyoto University
Junji Ueda: Associate Professor, Institute of Economic Research, Kyoto University
Shintaro Nakagawa: Former fellow, Institute of Economic Research, Kyoto University. Associate Professor, Shimonoseki City University
Daisuke Nishino: Former Senior Economist, Policy Research Institute, Ministry of Finance
Tatsuya Sugiura: Senior Economist, Policy Research Institute, Ministry of Finance
Kun Kawaguchi: Former Senior Economist, Policy Research Institute, Ministry of Finance
Motokazu Sakamura: Former Researcher, Policy Research Institute, Ministry of Finance
Tetsutaro Ohmatsu: Former Researcher, Policy Research Institute, Ministry of Finance
Noriyoshi Nagumo: Former Researcher, Policy Research Institute, Ministry of Finance
Syohei Kyotani: Former Researcher, Policy Research Institute, Ministry of Finance
Takuto Nagashima: Former Researcher, Policy Research Institute, Ministry of Finance
Kensaku Morita: Former Researcher, Policy Research Institute, Ministry of Finance
Tatsuo Sakamoto: Former Researcher, Policy Research Institute, Ministry of Finance
Takaki Hojo: Former Economist, Policy Planning and Research Division, Ministry of Finance
Yoko Masui: Former Economist, Policy Planning and Research Division, Ministry of Finance

Public Policy Review, 2011, vol. 7, issue 2, 175-298

Abstract: The "Fiscal Economic Model" is a macroeconomic model designed to ensure coherent interactions between the macro economy and the fiscal and social security system while giving the full-length formulation of fiscal balance and the social security system. The objective of this model is to develop mid-and-long term estimates of economic and fiscal conditions, which can be agreeable to the actual economic and fiscal data in Japan. In this paper, we discuss the underlying philosophy of the model, describe the actual theory behind the model equations, and present the results of a multiplier analysis to verify the characteristics of the model. This model, referring to the structure of the macroeconomic model of the Office of Macroeconomic Analysis in the Cabinet Office (2009), basically relates to the IS/LM-Philips Curve model, and is developed in consideration of the previous studies concerning social security benefits and costs, and tax revenue elasticity. In particular, this model can analyze the effects of aging population combined with the diminishing number of children on fiscal conditions and the macro economy.

Date: 2011
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