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- Title
Is Abe's Fiscal Policy Ricardian? What Does the Fiscal Theory of Prices Mean for Japan?
- Authors
Doi, Takero
- Abstract
The second arrow of Abenomics is flexible fiscal policy. However, it does not mean just fiscal stimulus as the Abe administration decided on the fiscal consolidation target of achieving a primary surplus by fiscal year 2020. Improving the primary balance implies making government debt more sustainable. Although the consumption tax rate was raised from 5% to 8% in April 2014, the Abe administration has decided twice to postpone increasing the consumption tax from 8% to 10%. In addition, a fiscal stimulus package was implemented. We use a Fiscal Stance Index to examine fiscal policy from the viewpoint of fiscal sustainability and a Markov switching model to examine fiscal policy from the viewpoint of the fiscal theory of the price level, and find that the Abe's fiscal stance is not Ricardian.
- Subjects
JAPAN; ECONOMIC development; FISCAL policy; RICARDIAN equivalence theorem; CONSUMPTION tax laws; ECONOMICS
- Publication
Asian Economic Policy Review, 2018, Vol 13, Issue 1, p46
- ISSN
1832-8105
- Publication type
Article
- DOI
10.1111/aepr.12199