Book contents
- Frontmatter
- Contents
- List of contributors
- Acknowledgments
- Chapter 1 Editor's summary
- Chapter 2 The corporate cost of capital in Japan and the United States: a comparison
- Chapter 3 The taxation of income from capital in Japan
- Chapter 4 Corporate tax burden and tax incentives in Japan
- Chapter 5 A closer look at saving rates in the United States and Japan
- Chapter 6 The Japanese current-account surplus and fiscal policy in Japan and the United States
- Chapter 7 Curing trade imbalance by international tax coordination
- Chapter 8 Picking losers: public policy toward declining industries in Japan
- Chapter 9 Corporate capital structure in the United States and Japan: financial intermediation and implications of financial deregulation
- Chapter 10 The Japanese bureaucracy in economic administration: a rational regulator or pluralist agent?
- Chapter 11 Japan's energy policy during the 1970s
- Chapter 12 Industry structure and government policies in the U.S. and Japanese integrated-circuit industries
Chapter 6 - The Japanese current-account surplus and fiscal policy in Japan and the United States
Published online by Cambridge University Press: 07 October 2009
- Frontmatter
- Contents
- List of contributors
- Acknowledgments
- Chapter 1 Editor's summary
- Chapter 2 The corporate cost of capital in Japan and the United States: a comparison
- Chapter 3 The taxation of income from capital in Japan
- Chapter 4 Corporate tax burden and tax incentives in Japan
- Chapter 5 A closer look at saving rates in the United States and Japan
- Chapter 6 The Japanese current-account surplus and fiscal policy in Japan and the United States
- Chapter 7 Curing trade imbalance by international tax coordination
- Chapter 8 Picking losers: public policy toward declining industries in Japan
- Chapter 9 Corporate capital structure in the United States and Japan: financial intermediation and implications of financial deregulation
- Chapter 10 The Japanese bureaucracy in economic administration: a rational regulator or pluralist agent?
- Chapter 11 Japan's energy policy during the 1970s
- Chapter 12 Industry structure and government policies in the U.S. and Japanese integrated-circuit industries
Summary
Introduction
The purpose of this chapter is to analyze the causes of the recent large surplus in the Japanese current account. Among these causes we pay particular attention to the role played by differences in fiscal policy between Japan and the rest of the world, notably the United States.
In 1984, the Japanese current-account surplus reached a historical high of $35 billion. Given that the two economies were close to business-cycle peaks, a significant part of the current-account surplus must have been noncyclical or structural. This noncyclical portion of the surplus is the focus of this chapter. We start with an analysis of savings and investment behavior in Japan and the United States, rather than with the current account itself. This enables us to show how changes in fiscal policy that alter domestic savings and investment lead to changes in the current account.
The analysis of savings and investment behavior is carried out in terms of a simple two-country model in which two endogenous variables, the real interest rate and the real exchange rate, determine savings and investment. The model abstracts from economic growth; therefore, various stock-flow interactions are not explicitly modeled. These include the effect of the capital stock on investment, the effect of a change in wealth on savings, and the effect of a change in net foreign assets on the exchange rate.
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- Publisher: Cambridge University PressPrint publication year: 1988
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