Debt burdens of governments and firms and the countercyclical fiscal policy

Kenshiro Ninomiya ()
Additional contact information
Kenshiro Ninomiya: Rikkyo University

Evolutionary and Institutional Economics Review, 2025, vol. 22, issue 1, No 16, 265-281

Abstract: Abstract The Japanese government has accumulated enormous government debt. Nevertheless, as the government debts of large economic powers such as Japan are riskless assets, this situation may pose little risk. Government debt is likely to be a “risk asset” in the case of a country with an irresponsible government and a fragile economy. Japanese government debt also may become a risk asset because the Japanese economy has suffered from a prolonged recession since the collapse of the bubble economy. Thus, the “lender’s risk” associated with a government debt should be considered. The main purpose of this study is to examine the financial instability, cycles, and effects of a countercyclical fiscal policy using a macrodynamic model that incorporates the debt burdens of firms and governments. As one principal result, our model demonstrates that a countercyclical fiscal policy may not be able to stabilize the dynamic system if the growing government debt induces households to restrain their consumption or hold money rather than government bonds. We believe that the credibility of the government debt is quite significant.

Keywords: Government debt burden; Financial instability; Financial cycle; Fiscal policy (search for similar items in EconPapers)
JEL-codes: E12 E32 E43 E62 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s40844-025-00300-x 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:eaiere:v:22:y:2025:i:1:d:10.1007_s40844-025-00300-x

Ordering information: This journal article can be ordered from
https://www.springer ... theory/journal/40844

DOI: 10.1007/s40844-025-00300-x

Access Statistics for this article

Evolutionary and Institutional Economics Review is currently edited by Kiichiro Yagi, Yuji Aruka and Takahiro Fujimoto

More articles in Evolutionary and Institutional Economics Review from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().