Discretionary deficit and its effects on Japanese economy

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Abstract

This paper identifies the discretionary component of Japan's public deficits, which is included in the structural component in existing work. The identification is done by collecting data and information of stimulus packages. Discretionary expenditure, discretionary revenue, and cyclical revenue are the main factors of increases in public deficits in the 1990s. The revenue side has had greater impacts on deficits than expenditure. The effects of stimulus packages are examined, using the discretionary deficits. Stimulus policies have multiplier effects, while overall public deficits have not. Results of analyses indicate that: (1) stimulus packages have economic effects, (2) they also bring fiscal deficits, thus can be additional constraints on the government budget, (3) public deficits can be eased with GDP growth if tax is returned to the previous level, (4) the public finance has a structural deficit.

Original languageEnglish
Pages (from-to)2239-2249
Number of pages11
JournalApplied Economics
Volume37
Issue number19
DOIs
Publication statusPublished - Oct 20 2005
Externally publishedYes

ASJC Scopus subject areas

  • Economics and Econometrics

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