Fading Ricardian Equivalence in Ageing Japan

September 27, 2016

Preview Citation

Format: Chicago

Ikuo Saito. Fading Ricardian Equivalence in Ageing Japan, (USA: International Monetary Fund, 2016) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Japan seems to be turning less Ricardian, a trend set to continue. First, the discount wedge seems to have risen, suggesting that consumers have become more myopic. Second, some evidence points to the possibility that an increasing number of households are liquidity constrained. If these developments continue, the impact of fiscal policy on the economy will gradually rise. While this will facilitate using fiscal policy to manage the economic cycle, it also calls for starting fiscal consolidation soon and in a gradual and steady manner, given the unsustainable public debt and the likely increasing challenges in funding the government's rising debt domestically.

Subject: Aging, Asset and liability management, Consumption taxes, Fiscal policy, Liquidity, Population and demographics, Public debt, Taxes

Keywords: Ageing, Aging, Consumer ratio, Consumption tax increase, Consumption taxes, Fiscal policy, Global, Japan, Japan liquidity, Liquidity, Liquidity constraint, Liquidity constraints, Multipliers, Myopia, Public debt, Ricardian equivalence, WP

Publication Details

Pages:

18
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/194
Stock No:

WPIEA2016194
ISBN:

9781475541649
ISSN:

1018-5941

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