A Survey of Fiscal Sustainability and Economic Growth (Japanese)
Policy Discussion Papers (Japanese) from Research Institute of Economy, Trade and Industry (RIETI)
Japan's public debt is increasing exponentially, and it is a primary policy objective to restore its sustainability. In this paper, I survey the existing research on the sustainability of the public debt in Japan and find that it might be necessary either to increase the consumption tax rate by 30% or implement a systematic fiscal consolidation plan lasting more than 100 years. Furthermore, I survey the research on the "public debt overhang," which shows that the economic growth rate decreases by about 1% if the public debt exceeds 90% of the gross domestic product (GDP). I also examine theoretical explanations of the public debt overhang. These findings indicate that restoring the sustainability of the public debt can enhance long-term economic growth.
Pages: 24 pages
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Persistent link: https://EconPapers.repec.org/RePEc:eti:rpdpjp:13004
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