ESRI Discussion Paper Series No.314
The ESRI Short-Run Macroeconometric Model of the Japanese Economy (2015version): Basic Structure, Multipliers, and Economic Policy Analyses

Koji Hamada
Executive Research Fellow, Economic and Social Research Institute, Cabinet Office
Masahiro Hori
Senior Research Fellow, Economic and Social Research Institute, Cabinet Office
Takashi Hanagaki
Research Officer, Economic and Social Research Institute, Cabinet Office
Ruriko Yokoyama
Former Official, Economic and Social Research Institute, Cabinet Office
Taisuke Kameda
Research Officer, Economic and Social Research Institute, Cabinet Office
Koichiro Iwamoto
Visiting Fellow, Economic and Social Research Institute, Cabinet Office

Abstract

This paper describes the basic structure and multipliers of the 2015 version of The ESRI Short-Run Macroeconometric Model of the Japanese Economy, which was first released in 1998.

The model is basically a demand-oriented, traditional Keynesian model with IS-LM-BP framework; however, it adopts recent developments in econometrics, such as co-integration and error correction to ensure long-run properties of the model.

The followings are some of the multipliers of policy simulations. The fiscal multiplier, i.e., the effect of government investments on GDP, is 1.14 in the first year. The effect of income tax reduction is slightly smaller (than that of the fiscal expenditures) due to its leak to household savings. 1% point rise of short-term interest rate reduces real GDP by 0.32% in the first year.

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