On Monetary and Fiscal Policy under Structural Changes and Societal Aging

The Japanese economy has been experiencing such structural changes as societal aging, industrial transition, and deepening of globalization. On the other hand, although the causation with such structural changes is not very clear, deflation has been persistent and monetary policy has been restricted by the zero lower bound on nominal interest rates. Given a very large debt-to-GDP ratio, room for further fiscal easing also has decreased. Consequently, to stimulate the economy over the business cycle, the economy needs to rely on the commitment to future accommodative monetary policy.

In this project, we first clarify the implications that such structural changes as societal aging have on the Japanese economy and monetary as well as fiscal policies. Then, we seek how monetary and fiscal policy should be designed in facing such structural changes.

May 27, 2014 - March 31, 2016