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Economic growth of Japan after 1945 - Term Paper Example

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This paper concerns the economic situation of Japan after the World War II. According to the text, the Japanese government had undertaken strong initiatives to enlarge its technological skills. The Japanese government has increased its allocations in the development of technology over time…
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Economic growth of Japan after 1945
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Download file to see previous pages The net national savings (NNS) of an economy is calculated from the difference between its gross national savings (GNS) and the rate of depreciation of the capital stock of the economy (Depr). NNS= GNS – Depr. Figure 2: Falling Savings in Japan over Time (Source: “World Bank”) In the above line diagram, the pink line clearly shows the fall in the net national savings rate in Japan over time. The real interest rate is the rate of interest which is experienced by an investor in the market after compensating for the loss from inflation. The real interest rate (R) is calculated on the basis of the Fischer’s Equation. This equation explains that real interest rate is the simple difference between the nominal interest rate (N) and the inflation rate in an economy (I). R= N – I. The inflation rate for an economy is again calculated from the consumer price index (CPI) of a country. CPI is the simple average of a particular basket of goods and services produced in nation. I = [CPI(this year) – CPI(last year)] / CPI(last year) (Baumol and Blinder 77). Figure 3: Real Interest Rates of Japan over Time (Source: “World Bank”) The above graph explains the real interest rate in Japan over the years. The entire quantitative data for the purpose of the research in this paper is taken on annual basis. The data table for the above line graph is given in Table 1 in the Appendix. Solow Model Analysis The Solow Model of growth is based on the concept of long run economic progress within the framework of neo-classical growth model. The neo-classical concept of growth states that a country can grow rapidly over time with the help of capital accumulation, population growth, technological progress and productivity. Figure 4: The Solow Model...
According to the view of the neoclassical economists, the technological progress seen in the economy of Japan should have facilitated the growth of its national product. Moreover, the technological progress in the country should have reduced the use of labor in its economy. However, this is not the real scenario in Japans economy. The service sector income of the country contributes to the majority of its national income. In the last few years, Japan also had to face a severe decline in its national income, net domestic savings and real interest rates. This is because, in the real world, the idealistic view of endogenous growth does not exist. The crises of credit and fluid capital in the market have reduced the level of national income in the economy of Japan (Paul 47). The fall in the level of production capabilities has forced to reduce the national income of most of the countries (like Japan) in the world after the global recession. The decline in the national income has, therefore, resulted in a fall of the per capita income level of the country. The fall in the income level is in turn responsible for the decline in the net domestic savings in Japan (Mankiw and Taylor 132). As the gross amount of savings in Japan has fallen over time, the number of investment opportunities in the country has also declined.
After the emergence of globalization and liberalization in the world economy, the prices of most of the goods and services in the market are determined by the free market forces of demand and supply. ...Download file to see next pagesRead More
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