Anmerkungen:
In: Journal of Japanese and International Economies, Volume 69, September 2023
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 1, 2022 erstellt
Beschreibung:
We adapt to the Japanese case a model of stochastic debt sustainability within a monetary policymaking framework. The model incorporates the effects of unconventional monetary policy and its potential unwinding on sovereign debt dynamics. A scenario tree represents stochastic and correlated macroeconomic and fiscal variables, and a coherent risk measure allows us to draw probabilistic inferences on sustainability. We calibrate the model to the Quantitative and Qualitative Easing (QQE) that the Bank of Japan launched in 2013. We use retrospective analysis to find a large favorable effect of the QQE on sovereign debt dynamics. Forward-looking simulations under different exit strategies show that the termination and unwinding of the QQE could raise debt sustainability concerns. A sharp tightening of global financial conditions could negatively impact debt dynamics similarly, requiring a fiscal adjustment to keep debt sustainable