The empirical analysis of project effects of public works under deflation

• Published in: Journal of Human Environmental Studies
• Main Authors: Satoshi Fujii, Keita Shibayama, Nakano Takeshi
• Format: Article
• Language: English
• Published: Society for Human Environmental Studies 2012-12-01
• Subjects: public investment; deflation gap; deflator; gdp; multiplier
• Online Access: https://www.jstage.jst.go.jp/article/shes/10/2/10_85/_pdf/-char/en
• ISSN: 1348-5253; 1883-7611

In this paper, a theoretical hypothesis that public works would have deterrence effects of deflation under the situation that deflation-gap exists was tested empirically. For testing this hypothesis empirically, we used macro-economics data in Japan since 1991 when the huge deflation-gap was brought by the collapse of the babble economy. As a result, we found that 1,000 billions yen's public works increases the GDP deflator by 0.2-0.8 % and increases nominal GDP by about 2,430 billions yen - 4,550 billions yen. This results support the hypothesis that public works would have deterrence effects of deflation under the situation that deflation-gap exists. It was also found that the deflation deterrence effects by the public works was larger than that by the in-crease export.