This paper analyzes various reform options for Japan’s public pension in light of large fiscal consolidation needs of the country. The most attractive option is to increase the pension eligibility age in line with high and rising life expectancy. This would have a positive effect on...

We show that using a remapped version of the decision rule for a standard dynamic stochastic optimization problem, where the mapping is defined by asymptotic limits of the rule as uncertainty goes to zero, produces a solution that is both more robust (in the sense that a stable solution emerges...

Using a standard, realistically calibrated model of buffer-stock saving with transitory and permanent income shocks, we study how cross-country differences in the wealth distribution and household income dynamics affect the marginal propensity to consume out of transitory shocks (MPC). Across...

In Japan, intergenerational inequality in lifetime resources is substantial, with a heavier fiscal burden on the young than the old. Moreover, given the need for fiscal consolidation, the inequality is even worse than existing policy would suggest. However, this does not mean that fiscal...

We present a macroeconomic model calibrated to match both microeconomic and macroeconomic evidence on household income dynamics. When the model is modified in a way that permits it to match empirical measures of wealth inequality in the U.S., we show that its predictions (unlike those of...

Despite the rapid rise in public debt and large fiscal deficits, Japanese Government Bond (JGB) yields have remained fairly stable. Possible factors include: Japan's sizeable pool of household savings, presence of large and stable institutional investors, and strong home bias. These factors are...

Since the global financial crisis, corporate investment has been weak in India. Sluggish corporate investment would not only moderate growth from the demand side but also constrain growth from the supply side over time. Against this background, this paper analyzes the reasons for the slowdown...

This paper structurally estimates the Capitalist Spirit Model, in which utility derives from direct preferences for wealth. Its results support the hypothesis that wealth accumulation is a luxury good, by showing that the marginal utility from wealth declines more slowly than that from consumption.

Despite the rise in public debt, Japanese Government Bond (JGB) yields have remained low and stable, supported by steady inflows from the household and corporate sectors, high domestic ownership of JGBs, and safe-haven flows from heightened sovereign risks in Europe. Over time, however, the...

Is the recovery from the global financial crisis now secured? A strikingly similar crisis that stalled Japan's growth miracle two decades ago could provide some clues. This paper explores the parallels and draws potential implications for the current global outlook and policies. Japan's...