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Unformatted text preview: cess planned savings translate into falling domestic demand (and a current account surplus reemerges, suboptimally, via a reduction in absorption).
Government is, of course, present in Japan and has
followed an expansionary fiscal policy. Whether
this attempt was sufficient to absorb all the ‘excess’
savings is impossible to tell. Ex-post leakages and
injections will always be equal. Two indirect pieces
of evidence, however, suggest that there may be
some truth in the hypothesis of ‘excess’ ex-ante Posen (1998) himself holds an opposite view. 5 OXFORD REVIEW OF ECONOMIC POLICY, VOL. 16, NO. 2 savings. First, the decline in real long-term interest
rates, relative to those of the rest of the world,
points to the presence of a domestic savings–
investment imbalance (Table 3). While in the early
1990s real interest rates were broadly similar in the
world’s three largest economies, by the late 1990s
Japanese rates had fallen to levels well below those
recorded in the United States and Germany. Second, most estimates agree that the economy is today
characterized by very substantial underutilization of
resources. The existence of a gap between actual
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This note was uploaded on 02/03/2014 for the course ECON 204 taught by Professor Devero during the Summer '13 term at American University of Sharjah.
- Summer '13