演講者簡介 : Dr. YiLi Chien received his PhD from the University of California, Los Angeles in 2006. He is currently a Research Officer at the Federal Reserve Bank of St. Louis. His research interests are Macroeconomics, Household Finance and Asset Pricing, and Asymmetric Information and Dynamic Contracting.
演講摘要 : For decades, Japan's central government ran large deficits mainly because its social security spending has increased significantly as Japan's population ages. Many studies therefore have projected a dim future for Japan’s fiscal situation. However, inflation remains low and there is no debt crisis. How did Japan do it? We study the government balance sheet, which shows that Japan's government engages in risky maturity transformation on a large scale by borrowing at floating rates and investing in long-duration assets. Essentially, The Japanese government implements a sizable carry trade, and it earns high returns in assets when its borrowing rates decline. We then study the welfare consequence of such a carry trade policy, especially through its low borrowing rates. The welfare effects depend on the duration of the household’s financial wealth relative to the duration of its excess consumption plan. Given the low duration of the stand-in Japanese household's wealth, our welfare analysis indicates that the majority of households is unambiguously worse off.
