The Domestic and Global Impact of Japan's Policies for Growth

22 Pages Posted: 3 Mar 2006

See all articles by Nicoletta Batini

Nicoletta Batini

International Monetary Fund (IMF)

Papa N'Diaye

International Monetary Fund (IMF) - Asia and Pacific Department

Alessandro Rebucci

Johns Hopkins University - Carey Business School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: November 2005

Abstract

Japan is facing a sizable fiscal imbalance against a backdrop of weak trend growth and growing external imbalances in the world economy. This paper examines the possible impact of fiscal adjustment and productivity-enhancing structural reforms on the Japanese and world economies. Simulation results indicate that these could reduce substantially Japan's fiscal imbalance with only limited spillovers to the rest of the world. Specifically, faster productivity growth would help lower Japan's debt and limit the tendency of fiscal consolidation to increase the external surplus. In fact, very rapid productivity growth could potentially lead to a decline in Japan's external surplus and thereby have a positive effect on global imbalance. The modest extent of the spillovers to the rest of the world reflect the small size of the shocks and the diminished size of Japan in the world economy.

Keywords: Japan, Global External Imbalance, Fiscal Consolidation, Productivity Growth, Macroeconomic Models

JEL Classification: F41, F47, F32

Suggested Citation

Batini, Nicoletta and N'Diaye, Papa and Rebucci, Alessandro, The Domestic and Global Impact of Japan's Policies for Growth (November 2005). IMF Working Paper, Vol. , pp. 1-22, 2005. Available at SSRN: https://ssrn.com/abstract=888078

Nicoletta Batini (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Papa N'Diaye

International Monetary Fund (IMF) - Asia and Pacific Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Alessandro Rebucci

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

HOME PAGE: http://carey.jhu.edu/faculty-research/faculty-directory/alessandro-rebucci-phd

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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