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The Macroeconomic Experience of Japan Since 1990: An Emprirical Investigation

Warwick McKibbin ()

Working Papers from Brookings Institution - Working Papers

Abstract: This paper outlines the macroeconomic experiences of the Japanese economy since 1990. The MSG2 multi-country model is used to determine the extent to which the strong yen and growth experience of Japan over this period was due to underlying trends in the Japanese economy and to what extent shocks such as changes in the settings of monetary and fiscal policies in Japan and overseas, as well as the Kobe earthquake, played a role. It is shown that many of the key features of the Japanese economy over this period can be attributed to inappropriate macroeconomic policy settings in Japan as well as reflecting long term trends due to population changes and a maturing of the Japanese economy. In particular, it is shown that announcing expansionary fiscal policy in advance of implementation and exaggerating the extent of actual stimulus, tended to appreciate the yen and raise long term real interest rates which further reduced real GDP growth over the period.

Keywords: ECONOMIC POLICY; ECONOMIC MODELS; ECONOMIC GROWTH (search for similar items in EconPapers)
JEL-codes: O40 O47 (search for similar items in EconPapers)
Date: 1996
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