Research and Studies

Home > Research and Studies > Bank of Japan Working Paper Series, Review Series, and Research Laboratory Series > Bank of Japan Working Paper Series 2011 > (Research Paper) Assessing the Effects of Fiscal Policy in Japan with Estimated and Calibrated DSGE Models

Assessing the Effects of Fiscal Policy in Japan with Estimated and Calibrated DSGE Models

August 2011
Takuji Fueki*1
Ichiro Fukunaga*2
Masashi Saito*3

Click on Full Text [PDF 395KB]


In this paper, we assess the effects of fiscal policy in Japan using two dynamic stochastic general equilibrium (DSGE) models. One is a medium-scale DSGE model of Japan's economy ("M-JEM," Fueki et al., 2010) estimated using Bayesian techniques. The other is the IMF's multi-region "GIMF (Global Integrated Monetary and Fiscal)" model (Kumhof et al., 2010) calibrated to data for Japan and other countries. The government consumption multiplier calculated from the former model is larger than that from the latter, mainly because the negative effects of the resulting increase in the interest rate are larger in the latter model. In both models, however, the effect of a positive government consumption shock on real GDP becomes substantially smaller when the government targets a fiscal surplus by raising tax rates. The effectiveness of endogenous adjustment of the tax policy in response to non-fiscal shocks is not so much different between the two models and is not much affected by changes in the interest rate.

Fiscal Policy; Dynamic Stochastic General Equilibrium Model; Global Integrated Monetary and Fiscal (GIMF) Model

JEL classification
E62; E17

The authors are grateful to Pelin Berkmen, International Monetary Fund, for her kind support in using the GIMF model and for fruitful discussions. They would also like to acknowledge helpful comments from Kosuke Aoki, Michel Juillard, Etsuro Shioji, the staff at the Bank of Japan, and the seminar participants at the International Monetary Fund, the Central Bank Macroeconomic Modeling Workshop in Manila, the International Conference on Computing in Economics and Finance in San Francisco, and the Asian Meeting of the Econometric Society in Seoul. Views expressed in this paper are those of the authors and do not reflect those of the Bank of Japan.

  •   *1 Research and Statistics Department (currently Personnel and Corporate Affairs Department), Bank of Japan, and Indiana University.
  •   *2 Research and Statistics Department (currently Financial Markets Department), Bank of Japan.
    E-mail :
  •   *3 Research and Statistics Department (currently Monetary Affairs Department), Bank of Japan.
    E-mail :


Papers in the Bank of Japan Working Paper Series are circulated in order to stimulate discussion and comments. Views expressed are those of authors and do not necessarily reflect those of the Bank.
If you have any comment or question on the working paper series, please contact each author.
When making a copy or reproduction of the content for commercial purposes, please contact the Public Relations Department ( at the Bank in advance to request permission. When making a copy or reproduction, the source, Bank of Japan Working Paper Series, should explicitly be credited.