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The Rapidly Changing Nature of Japan’s Public Debt
Japan’s general government debt-to-GDP ratio is the highest of advanced economies, due in part to increased spending on social services for an aging population and a level of nominal GDP that has not increased for two decades. The interest rate payments from taxpayers on this debt are moderated by income earned on government assets and by low interest rates. One might think that the Bank of Japan’s purchases of government bonds would further ease the burden on taxpayers, with interest payments to the Bank of Japan on its bond holdings rebated back to the government. Merging the balance ...
Fiscal Drag from the State and Local Sector?
With July just around the corner, most cities and states are preparing for the start of a new fiscal year. Since the start of the recent recession, some have worried that fiscal stress on the sector would result in massive municipal bond defaults. At the end of 2011, many breathed a sigh of relief as aggregate state government revenues finally re-attained the peak they had achieved before tumbling during and after the recession. Unfortunately, relief may be premature. When adjusted for inflation, 2011 state tax revenues were still below their levels of four years ago, and local tax revenue ...
FISCAL SURPRISES AT THE FOMC
This paper provides a detailed examination of a new set of fiscal forecasts for the U.S. assembled by Croushore and van Norden (2017) from FOMC briefing books. The data are of particular interest because (1) they afford a look at fiscal forecasts over six complete business cycles and several fiscal policy regimes, covering both peacetime and several wars, (2) the forecasts were precisely those presented to monetary policymakers, (3) they include frequently updated estimates of both actual and cyclically adjusted deficits, (4) unlike most other U.S. fiscal forecasts, they were neither partisan ...