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Estimating Non‐ K eynesian Effects for J apan
Author(s) -
Kameda Keigo
Publication year - 2012
Publication title -
asian economic policy review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.58
H-Index - 20
eISSN - 1748-3131
pISSN - 1832-8105
DOI - 10.1111/j.1748-3131.2012.01238.x
Subject(s) - economics , gross domestic product , vector autoregression , monetary economics , impulse response , stimulus (psychology) , fiscal multiplier , fiscal policy , econometrics , government spending , macroeconomics , mathematics , psychology , welfare , market economy , mathematical analysis , psychotherapist
Is a fiscal stimulus effective? This classical question has received significant research attention since the collapse of the global financial services firm L ehman B rothers. Although most studies agree on the existence of K eynesian multiplier effects, several studies also demonstrate the existence of non‐ K eynesian effects. What explains this lack of consensus in the literature? In this paper, we aim to bridge the two views by estimating a near‐vector autoregressive system that includes interaction terms of fiscal instruments, and the debt‐to‐gross domestic product ( GDP) or the primary‐deficit‐to‐ GDP ratios. Moreover, to embed the dynamics of the debt‐to‐ GDP ratio in the analysis, we explicitly incorporate the government budget constraint. By computing and comparing the impulse response functions, we find K eynesian effects when fiscal conditions are sound, and non‐ K eynesian effects when the primary deficit is large.