The Impact of Fiscal Consolidation and Structural Reformson Growth in Japan
January 1, 2011
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Summary
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.
Subject: Consumption taxes, Fiscal consolidation, Fiscal policy, Production, Productivity, Public debt, Structural reforms, Taxes
Keywords: Asia and Pacific, capital goods, Consumption taxes, debt ratio, exchange rate, expenditure containment, Fiscal consolidation, GDP, Global, goods producer, growth prospect, labor productivity level, monetary policy, productivity, productivity increase, structural policies, tax reform, WP
Pages:
21
Volume:
2011
DOI:
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Issue:
013
Series:
Working Paper No. 2011/013
Stock No:
WPIEA2011013
ISBN:
9781455211913
ISSN:
1018-5941
