The Impact of Fiscal Consolidation and Structural Reformson Growth in Japan

Pelin Berkmen

No 2011/013, IMF Working Papers from International Monetary Fund

Abstract: With Japan’s public debt reaching historical levels, the need for fiscal consolidation and structural reforms have increased. As fiscal consolidation will require a sustained and large adjustment in the fiscal balance, its growth effect is a concern particularly for the short run. This paper uses the IMF’s Global Integrated Monetary and Fiscal Model to analyze the growth impact of fiscal consolidation and structural reforms. Although fiscal consolidation has short-term costs, the potential long-term benefits are considerable, and reforms that raise potential growth could support consolidation. Simulations show that the external environment also matters but domestic policies should be the priority.

Keywords: WP; productivity; exchange rate; GDP; monetary policy; Fiscal consolidation; tax reform; structural policies; productivity increase; debt ratio; expenditure containment; labor productivity level; capital goods; goods producer; growth prospect; Consumption taxes; Asia and Pacific; Global (search for similar items in EconPapers)
Pages: 21
Date: 2011-01-01
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Citations: View citations in EconPapers (1)

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