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In the 1990s we have experienced a rapid increase in fiscal deficits. In the 1990s public spending and transfer payments have been gradually raised due to political pressure from interest groups, resulting in large budget deficits. The question of whether Japan’s fiscal policy is sustainable, in the sense of being consistent with an intertemporal budget constraint, has long been a concern.
KeywordsFiscal Policy Discount Factor Real Interest Rate Government Bond Transfer Payment
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