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ECOS2025

Tutorial 4 (Week 4)

Questions  are  based  on  Week  3  lecture  contents  and  are  designed  to  deepen  our  conceptual understandings. Students are strongly advised to discuss these questions with their group members in their designated tutorial classes. Questions marked * are designed for student (or group) led discussion.

Readings:

a)    International Monetary Fund (2011) “Did the Plaza Accord Cause Japan’s Lost Decades,” in Ch. 1, World Economic Outlook, Washington, DC, International Monetary Fund, April, pp. 53-55.

http://www.imf.org/external/pubs/ft/weo/2011/01/pdf/text.pdf

b)    Koichi Hamada, “Keynes Reborn”, Project Syndicate, Dec 28, 2016.https://www.project-             syndicate.org/commentary/japan-fiscal-theory-of-the-price-level-by-koichi-hamada-2016-12or https://www.thedailystar.net/op-ed/keynes-reborn-1337476

1. What is the Dodge Line?  Did it help with Japan’s post-war reconstruction? How did Japan benefit from the Korean War over 1950-53?

*2. Reading a) above is relevant to this question. Critically appraise the statement that “the Plaza Accord caused Japan’s Lost Decades” .

*3. Why is ageing population a drag on an economy? What should Japan do in order to overcome the adverse economic impact of an ageing population? Discuss.

*4. What is Abenomics? Explain. Was it successful? Explain your answer with reference to Japan’s economic data for inflation, government debt, and real GDP growth over the period 2012 – 2019.

5. Reading b) above is relevant to this question. Some economists argue that public debt can help    inflate the economy, which is what Japan needs. This is based on the Fiscal Theory of the Price Level (see my note on Canvas). Discuss the rationale behind this line of argument, and how it can be         relevant to Japan.