Regime Switches in Japan's Fiscal Policy: Markov‐Switching VAR Approach

Regime Switches in Japan's Fiscal Policy: Markov‐Switching VAR Approach

This paper empirically investigates the changing dynamics of fiscal policy shocks on Japan's macroeconomy. By estimating a Markov‐switching vector‐autoregressive (VAR) model, regime switches in both automatic fiscal responses to output and discretionary fiscal shocks are endogenously investigat...

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Veröffentlicht in:The Manchester school 2019-09, Vol.87 (5), p.724-749
Hauptverfasser: Ko, Jun‐Hyung, Morita, Hiroshi
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Consumption
Economic models
Fiscal policy
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Morita, Hiroshi
description This paper empirically investigates the changing dynamics of fiscal policy shocks on Japan's macroeconomy. By estimating a Markov‐switching vector‐autoregressive (VAR) model, regime switches in both automatic fiscal responses to output and discretionary fiscal shocks are endogenously investigated. The main findings are summarized as follows. First, structural changes occurred in the mid‐1970s, early 1990s, late 1990s and late 2000s. Second, in contrast to the other regimes, expansionary fiscal shocks depress output and consumption in the third regime. Third, the twin‐deficit hypothesis holds in the second to fourth regimes.
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source Wiley Online Library - AutoHoldings Journals; EBSCOhost Business Source Complete
subjects Consumption
Economic models
Fiscal policy
title Regime Switches in Japan's Fiscal Policy: Markov‐Switching VAR Approach
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