Macro-economic changes and budgets for social security: projections based on state-space models
International Social Science Journal (Chinese Edition)
No.1, 2014
Macro-economic changes and budgets for social security: projections based on state-space models
(Abstract)
Hatano Toshiya
As aging proceeds, public budget for pension is in a crisis. Scholars have predicted quantitatively the impacts on the public budget and considered the appropriateness of the necessary adjustments to the system in view of the changes caused by the impacts. However, it is inadequate even when the predictions are basically correct. It is inevitable there is error in prediction, because there is uncertainty at any time. To make the policies adopted trustful and solve the problem of uncertainty, projections with certain fluctuation are necessary. There are systemic wrongs in the Japanese government’s predictions because of deviant errors, which has been interfering the government’s fiscal operations. The author analyzes the interferences with simple mathematic models and tries to predict the budget for social security with state-space models. He argues that the modeling can either explain the changes of observable variables or consider the changes of unobservable factors in decisions on fiscal revenue and expenditure. Instead of definite estimations, the projections are possible predictions showing clear trustful ranges. In long-term projections, it is significant to mark clearly the ranges.