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Macroeconomic policy coordination between Japanese central and local governments

Yoshito Funashima ()
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Yoshito Funashima: Tohoku Gakuin University

Empirical Economics, 2018, vol. 54, issue 4, 1631-1651

Abstract: Abstract It is commonly believed that public investments play a central role in Japan’s discretionary fiscal policies, but the majority is implemented by local governments. After distinguishing between public investment by the central government and that by local governments, this paper utilizes wavelet techniques to examine macroeconomic policy coordination between Japanese central and local governments. We demonstrate that local government investments fail to coordinate with central government investments during the lost two decades, and such a coordination failure is a one-time phenomenon in nearly a half-century. In this period, local government investments exhibit no countercyclical behavior to business cycles, which is contributory to the ineffectiveness of fiscal stimulus that is pointed out by our predecessors.

Keywords: Public investment; Wavelet; Central government; Local government (search for similar items in EconPapers)
JEL-codes: E32 E62 (search for similar items in EconPapers)
Date: 2018
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