Structure of the Forward-Looking Model of the Japanese Economy and Simulation Results

In this paper, we discuss the structure of a forward-looking model of the Japanese economy, which has been jointly developed by the Institute of Economic Research, Kyoto University, and the Policy Research Institute, Ministry of Finance, and use the model to simulate policies for fiscal consolidation. In the simulation, we compared our results with those from the IMFfs MULTIMOD model (whose data and equation list are open to the public) as thoroughly as possible and verified the appropriateness of the simulation results of our macroeconomic model. The overall results are similar to those from the IMF model, and we confirmed that our model can grasp the mechanism in which an economic agent will smooth out economic activities in anticipation of any future shock.