Template-type: ReDIF-Paper 1.0
Author-Name: Ryuta Ray Kato
Author-Name-First: Ryuta
Author-Name-Last: Kato
Author-Email: kato@iuj.ac.jp
Author-Workplace-Name: International University of Japan
Author-Workplace-Homepage: http://www.iuj.ac.jp/
Author-Name: Hiroaki Miyamoto
Author-Name-First: Hiroaki
Author-Name-Last: Miyamoto
Author-Email: hmiyamot@iuj.ac.jp
Author-Workplace-Name: International University of Japan
Author-Workplace-Homepage: http://www.iuj.ac.jp/
Title: Fiscal Stimulus and Labor Market Dynamics in Japan
Abstract: The paper studies effects of fiscal expansion on the Japanese labor market. First, using a structural VAR model, we find that the unemployment rate falls and employment rises following an increase in government spending. We also find that fiscal expansion affects flows in and out of unemployment. While an increase in government spending increases the job-finding rate, it reduces the separation rate. We then incorporate search and matching frictions into a standard dynamic general equilibrium model, and study whether the model can explain what we observed in data. While the model fails to predict the exact size of the impact of the government spending shock on the Japanese labor market variables, it can consistently capture the empirical pattern of responses of labor market variables to the shock.
Classification-JEL: E24; E62; J64
Length: 30 pages
Creation-Date: 2012-11
Number: EMS_2012_19
File-URL: https://www.iuj.ac.jp/workingpapers/index.cfm?File=EMS_2012_19.pdf
File-Format: Application/pdf
File-Function: First version, 2012
File-Size: 465KB
Keywords: Policy, Unemployment, Labor market, Search and matching
Handle: RePEc:iuj:wpaper:EMS_2012_19