Note 1-67

(67) With regard to the budget deficit multiplier of public investment, according to the Short-Run Macroeconometric Model of Japanese Economy (2001 tentative version), if nominal public fixed capital formation is continuously raised by an amount equal to 1% of Nominal GDP, Real GDP will increase 1.09% in the first year, 1.24% in the second year, and 1.05% in the third year. As for the fiscal deficit multiplier, if individual income tax is cut by an amount equal to 1% of Nominal GDP, Real GDP will increase 0.62% in the first year, 0.59% in the second year, and 0.05% in the third year. If calculated in the same manner, the balanced budget multiplier of public investment (the multiplier when public investment is increased by raising the personal income tax) will increase 0.47% in the first year, 0.65% in the second year, and 1.00% in the third year.