Silviase/jgov_v1.4_full_ann huggingface dataset:
shocks is greatest for the US and CA so that both currencies

appreciate. All other currencies depreciate due to the weak

response of interest rates to a fiscal expansion, so that

deficits in the current account generated by the fiscal

stimuli outweigh surpluses in the capital account.

Second, whether the transmission effects of a fiscal

shock are strengthened under floating exchange rate or not

depends critically not only on the direction of the exchange

rate movement but also on the relative magnitude of the

exchange rate appreciation of the transmitted countries. The

smaller the appreciation of the currencies of the transmitted

countries, the larger the impact of foreign fiscal expansion

on real GNP in these countries under floating than under

fixed exchange rates, and vice versa.

### V. Oil Shocks, Exchange Rates and Transmission Mechanisms under Different Exchange Rate Regimes

## (A) Some theoretical issues

At first sight it might seem obvious that for an oil-importing country a price rise in internationally traded petroleum leads to currency depreciation through its direct worsening effect on the trade balance. However, as OPEC spends its increased income on purchases of goods and services from abroad, it will indirectly improve the current account of oil-importing countries and eventually fully offset the initial deterioration of the trade balance when
OPEC spends up the whole of the increased income. Then, we

might expect the exchange rate of oil-importing countries to

remain unchanged after all. Even though the current account

of oil-importing countries as a whole may eventually be

balanced, it does not necessarily mean that the current

account of individual oil-importing countries will be

balanced. Then, the distribution of the current account

imbalance among oil-importing countries must affect exchange

rates among oil-importing countries. The determinants of

exchange rates among oil-importing countries would be (1)

relatively high or low import dependence on imported oil,

influencing the size of oil deficits in the trade account,

(2) a relatively elastic or inelastic demand for oil and (3)

a relatively large or small share of OPEC spending out of its

increased income, which is determined by the international

price competitiveness of individual oil-importing countries.

This simple model reveals several determinants of

exchange rates after an oil shock. This simple model,

however, misses a crucial aspect of portfolio selection by

OPEC. Since OPEC does not immediately increase its imports

to match its increased export revenues, it is necessary first

to introduce this lag, and the corresponding capital flows

into the model.

It is unfortunate that bilateral and quarterly data on

international capital flows are not available. Therefore, we

have given up an attempt to produce an international

financial link sub-model which is consistent with our
international trade link sub-model embodied in the EPA World Econometric Model. This problem is to be solved in the future. Instead, the import demand function of ME includes an element of the speed of adjustments of ME's imports to the cumulative trade account surplus. The estimated function indicates that ME's marginal propensity to import is 0.1695 in the short-run and 0.3248 in the long-run.

(B) The Impact of an Oil Shock under Floating Exchange Rates

## (i) General observations

The adverse impact of an increase in the price of oil on real GNP is greatly mitigated in JA by floating exchange rates. When the oil price rises by 10 percent on a sustained basis, real GNP declines by 0.5 - 1.0 percent in JA for most years under the fixed regime and such decline is the worst among advanced countries (Table 9). In sharp contrast, the magnitude of declines in real GNP is smallest in JA, once the exchange regime changes from fixed to floating. GE, UK and FR also enjoy such mitigation of the adverse impact on real output under the floating regime, but to much lesser extent than the case of JA. All other countries suffer from a more or less similar adverse impact on real output for most years after an oil shock, regardless of the exchange rate regime they adopt.
Table 9 Effects on the Nine Country Economies of Sustained Oil Price Increase by 10 percent

(%, deviations from the standard solution)

Year	Real GNP	Domestic Prices	Official Settlement*	Exchange Rates
Fix	Flex	Fix	Flex	Fix	Flex	Fix	Flex
US	1	-0.09	-0.12	0.24	0.20	-1.94	-3.45	0
2	-0.29	-0.31	0.48	0.30	-1.08	-5.81	0
3	-0.24	-0.24	0.58	0.26	-0.55	-5.23	0
6	0.01	0.18	0.70	0.53	-0.38	-3.66	0
UK	1	-0.02	0.04	0.28	0.31	-62	-25	0
2	-0.29	-0.23	0.63	0.61	-41	-22	0
3	-0.31	-0.15	0.62	0.55	-34	-16	0
6	0.02	0.08	0.60	0.66	-57	20	0
FR	1	-0.07	-0.04	0.23	0.25	-2.03	-0.91	0
2	-0.08	0.09	0.45	0.71	-1.55	-0.90	0
3	-0.06	0.09	0.45	0.86	0.44	0.18	0
6	0.24	0.13	0.50	0.25	5.87	0.70	0
GE	1	-0.34	-0.24	0.07	0.11	-1.92	-1.09	0
2	-0.58	-0.42	0.15	0.30	-1.51	-0.81	0
3	-0.34	-0.20	0.13	0.36	-0.07	0.53	0
6	0.08	0.52	0.04	0.37	-0.17	0.03	0
IT	1	-0.24	-0.21	0.37	0.41	-151	72	0
2	-0.29	-0.31	0.51	0.44	145	-72	0
3	-0.26	-0.36	0.53	0.37	354	66	0
6	0.14	0.21	0.58	0.50	159	125	0
CA	1	-0.01	0.01	0.21	0.24	0.0	-97	0
2	-0.20	-0.17	0.35	0.30	0.0	127	0
3	-0.29	-0.36	0.36	0.20	0.0	-27	0
6	-0.05	0.10	0.35	0.25	0.0	31	0
JA	1	-0.12	0.06	0.70	1.01	-2036	-577	0
2	-0.52	-0.05	1.09	2.27	-2721	-341	0
3	-0.79	-0.21	1.06	2.90	-2405	834	0
6	-0.99	-0.32	1.01	2.00	-2705	469	0
AL	1	0.03	0.04	0.25	0.20	-51	-34	0
2	0.02	-0.05	0.46	0.21	11	-3	0
3	-0.02	-0.12	0.53	0.14	6	-45	0
6	0.02	0.02	0.67	0.24	39	-13	0
KR	1	-0.60	-0.62	1.00	0.89	-46	-56	0
2	-1.42	-1.49	1.40	0.82	-62	-97	0
3	-1.82	-1.86	1.07	0.24	-46	-70	0
6	-0.94	-0.88	0.03	-0.23	53	75	0

(Note) * Units for balance of payments items in tables of multipliers as follows:

US: billion US$; FR: billion FR.F.; GE: billion DM;

IT: billion lire; UK: million £; CA: million CA$;

JA: million US$; AL: million AL$; KR: million US$

(Source) The EPA World Econometric Model, February 1984
In other words, floating exchange rates insulate JA

from the negative impact on real GNP to the greatest extent,

and GE, UK and FR to a lesser extent, whereas all other

countries are not insulated from the adverse impact of an oil

price increase by the help of flexibility in the exchange

rate. It is often argued that even floating exchange rates

cannot insulate an economy from real supply shock abroad,

while a home economy can be insulated from a foreign money

supply shock. The multipliers of the EPA model suggest that

such argument is not valid.

What accounts for the different impact of an oil shock

on real output among countries under floating exchange rates?

(ii) Near-perfect insulation of Japan’s GNP from a real shock

The most important insulation mechanism for real GNP in

JA works through a depreciation of the yen and thereby

enhanced international price competitiveness of JA. The

initial price increase of imported goods is sharpest for JA

(4.9 percent for the first year as compared with 1.5 - 2.4

percent for other advanced countries) as is shown by the case

of fixed exchange rates, reflecting her heavier dependence on

imported oil. As a result, export prices of JA rise the most

among all the countries in the initial year after an oil

shock. However, the international price competitiveness of

JA improves rather rapidly, as suggested by a rapid decline

in her export prices under the fixed exchange rates, while in

other countries their export prices do not decline or even
increase as time goes by. This sharp difference in the price performance between JA and other countries is ascribed to much smaller passing through effects of imported inflation on the wholesale price index or inventory stock deflator in JA and hence, on the private consumption deflator. This better price performance is also attributable to modest rises in money wages in relation to the increases in the consumption deflator. In other countries, wage adjustments to increased consumption deflator are rather quick, without allowing real wages to decline in the face of an oil shock which enforces the transfer of real income to OPEC through the terms of trade changes. In spite of such a relative improvement in domestic price situation after an oil shock, the exchange rate depreciates most sharply among advanced countries, resulting in a notable enhancement of the international price competitiveness of exportable goods of JA. When the oil price rises by 10 percent, the yen exchange rate depreciates by 7.0 - 7.1 percent for the second and third year, Whereas other currencies depreciate much less: by 3.0 - 3.4 percent for DM.2.5 - 2.6 percent for FF and 1.0 - 1.3 percent for £ Due to the depreciations of these currencies, the effective exchange rate of the US dollar appreciates by 2.6 - 2.7 percent in the second and third years, consecutively. The Australian dollar also appreciates for all years and the Canadian dollar does so from the third year on, perhaps reflecting the relatively rich endowment of energy resources in these two countries.
As a consequence, real exports of goods of JA expand

most sharply except for the first year, while most countries

suffer from continued declines in real exports of goods

except for FR which is the only country other than JA which

enjoys expansions of exports. In particular, real exports of

goods from JA to ME (the Middle East) expand most rapidly

among advanced countries. While exports of goods from other

countries to ME expand about 3 - 5 percent in the second -

fourth years, exports of JA to ME increase by 3.8 - 8.0

percent for the same years. In other words, OPEC spends its

increased income more than proportionately on goods of JA.

In terms of absolute value in US$, the value of exports from

JA to ME is twice as large under the floating exchange rates

as under fixes exchange rates, whereas the value of other

countries increase by only about 10 - 15 percent owing to

floating exchange rates.

Responses to an oil shock of real imports of goods

among oil-importing countries are also equally important for

determining the size of the adverse impact on real GNP. JA's

imports of goods decline the most among the oil-importing

countries, helping to mitigate the adverse impact of an oil

shock on real output. The aforementioned large depreciation

of the yen further helps to reduce JA’s imports of goods not

only from ME but also from other countries.
(iii) The impact of an oil crisis on the world economy under

floating rates

Do the insulation effects of floating exchange rates in

favour of JA’s real output crowd out other countries through

the large expansion of net exports from JA after an oil

shock?

An answer to this question depends on a difference in

declines in world real GNP and world trade after the oil

shock between floating and fixed exchange rates.

Multipliers for a sustained oil price increase of 10 percent

indicate that under fixed exchange rates the aggregate real

GNP of the nine individual countries decline by 0.34 percent

in the second year as against 0.25 percent in the same year

under floating exchange rates (Table 10). As time proceeds,

the differences in the declines in world real GNP become

wider in favor of the floating exchange regime. Likewise,

that the world trade in real terms shrinks by 0.10 - 0.20

percent less for all years under the floating than the fixed

regime. Even in JA, the import demand for goods shrinks less

despite the substantial depreciation of the yen, owing to its

relatively more favorable output effects on JA.

There are also somewhat larger increases in imports by

ME from the rest of the world under the floating regime.

Under fixed exchange rates, ME’s imports of goods increase by

1.0 - 4.4 percent for the first four years. Under the

floating regime, however, ME’s imports increase by 1.2 - 5.0
(%, deviations from the standard solution)

Year	World trade	World primary commodity price	Total GNP of the nine countries	Total exports of the nine countries
FIX	FLEX	FIX	FLEX	FIX	FLEX	FIX	FLEX
1	-0.63	-0.53	0.88	0.86	-0.13	-0.09	-0.39	-0.29
2	-0.89	-0.72	-0.77	-0.82	-0.34	-0.25	-0.60	-0.28
3	-0.72	-0.65	-1.36	-1.47	-0.33	-0.22	-0.52	-0.11
6	-0.23	0.00	-0.89	-0.51	-0.11	0.14	0.22	0.75

Year	Total imports of the nine countries	Exports of Middle East	Imports of Middle East	Trade balance of Middle East $ ^{**} $
FIX	FLEX	FIX	FLEX	FIX	FLEX	FIX	FLEX
1	-0.66	-0.60	-1.54	-1.41	1.02	1.15	7084	7493
2	-1.33	-1.27	-2.26	-2.25	2.61	3.08	5244	6063
3	-1.29	-1.34	-2.21	-2.78	3.81	4.55	3572	3628
6	-0.85	-0.61	-4.90	-6.19	2.56	2.27	1635	-339

(Notes) * In real terms except for world primary commodity price and the trade balance of Middle East.

** In million US dollars

(Source) The EPA World Econometric Model, February 1984
percent for the same years. To a lesser extent, CA, AL and

all regions other than ME (Asia except KR, Latain America,

Socialist Countries, Western Europe and the Rest of the

world) reduce their imports less under the floating than the

fixed regime. In other words, the floating exchange rate

contributes to a smaller contraction in world trade through

import expansion by countries or regions due to their

currency appreciations against other currencies. It is

noteworthy that exports of goods from ME (composed mainly of

petroleum) decline increasingly more as time goes by under

the floating as compared with the fixed exchange regime.

This is ascribed to depreciations of many currencies vis a

vis US dollar which make more expensive the price of oil

denominated in the domestic currency.

## (iv) Implications of oil price hike for US dollar

What are the implications of the appreciations of the

effective exchange rate of the U.S. dollar? It suggests that

it will take ME long to spend the whole increased income. In

the meantime, OPEC invests a current account surplus mainly

in dollar-denominated assets and reshuffles portfolios later

on. Though the EPA model cannot capture such portfolio

selection of ME by currency denomination due to the lack of

such data on a quarterly basis, the net demand for US dollars

must increase due to the payment of higher oil bill in dollar

and the high possibility that in the long run, too, OPEC

selects external assets denominated in US dollar in a greater
proportion than other currencies-denominated assets. This

will be consistent with the appreciation of the U.S. dollar

after an oil shock.

Despite the appreciation of the currency, US does not

suffer from a larger decline in real output under floating

exchange rates. This is because low price levels induced by

the currency appreciation prevent personal consumption from

declining much and lower interest rates also help interest

rate sensitive expenditures. These favorable effects offset

a larger decline in real exports due to the currency

appreciation.

## (C) What would have happened, if an oil shock had taken

## place under fixed exchange rates

Under the fixed exchange rate regime, an oil shock would

have hit the Japanese economy hardest among advanced

countries through the following mechanisms.

The multipliers of the EPA model indicate that a

sustained rise in the oil price by 10 percent reduces

external reserves of JA by US$7,162 million for the first

three years under fixed exchange rates. This enormous

decline in external reserves should be compared with only a

decline of US$918 million in external reserves for the first

two years under floating exchange rates, and even an increase

in external reserves of US$834 million in the third year,

which fully offsets the decline in reserves in the previous
two years (Table 9). In other words, the Japanese economy

would have fallen in a serious balance of payments crisis, if

an oil shock had taken place under the fixed rate regime.

Such a balance of payments crisis would not have made the

fixed exchange rate regime viable. The multipliers of the

EPA model shows that under the fixed exchange rate regime,

real imports into JA would have shrunk less by 0.6 - 1.26

percent for the second and third years as compared with the

floating regime, while real exports from JA would have

declined by about 1 percent per year for the same years

instead of 2.3 - 2.9 percent increases under floating rates.

In other words, the balance of payments deficit would not

have been financed much through an expansion in net exports

of JA in real terms. Floating exchange rates prevent such a

sharp decline in external reserves by inviting capital

inflows into JA as well as by improving its current account.

Both the regressive exchange rate expectation generated

through depreciations of the yen and the enhanced

international price competitiveness of JA are the two key

factors for balance of payments adjustments, that is, a

demonstration of the external financing function of floating

exchange rates.

The mechanism similar to JA works for other countries,

too. Under the fixed regime, all countries suffer from

decline in external reserves, but to a much lesser extent

than the case of JA. Thus, in the decade of oil crisis, a
serious balance of payments crisis was avoided and the

Japanese economy was insulated most effectively among

advanced countries by the floating regime.

### V I. CNCLUSIONS

The multiplier exercises performed by using the EPA

World Econometric Model have demonstrated that floating

exchange rates by no means perfectly insulate domestic

economies from foreign disturbances. The perfect insulation

has never been demonstrated under realistic assumptions

regarding prices, wages, the speeds of adjustments in

different markets, imperfect substitutability between home

and foreign bonds and dynamic exchange rates expectations.

It is rather risky to generalize the mechanisms for the

transmission of and insulation from economic disturbances

under floating exchange rates. This is because such

mechanisms greatly depend on structural parameters for both

the transmitting and transmitted countries and also on the

way of conducting monetary policies in the transmitted

countries. The differences in the structural parameters and

monetary policy targets are important for interpreting actual

transmission and insulation effects of each economic

disturbance.

In addition, usual discussions relate either

transmission or insulation effects only to real output (or

employment). This is a rather Keynesian type of
understanding of the transmission and insulation effects.

Since domestic policy objectives are now not only higher real

output but also lower price inflation, the transmission to

and insulation from domestic price inflation, the transmission to

policymakers. If contractionary monetary policy abroad

induces a depreciation of home currency without, either

stimulating or depressing demand for home real output, this

perfect insulation of home real output may not be relevant to

authorities of the home economy. Insulation effects cannot

be evaluated without taking into consideration the cost of

benefiting from such effects.

It is usually expected that under floating exchange

rates a foreign monetary disturbance will have opposite

effects on foreign and domestic real output. This makes a

sharp contrast to the case of fixed exchange rates, under

which the effects of such monetary disturbance will be

exerted on both foreign and home output in the same

direction. However, the multipliers of the EPA model

indicate that only in the case of US, her monetary shock

generally has such opposite effects. In the case of non-US

monetary shock, the effects are generally transmitted to

domestic output in the same direction. Still importantly,

however, such transmission effects are greatly mitigated

under floating exchange rates as compared with fixed rates.

Generally, a foreign fiscal or expenditure disturbance

is transmitted to home output with greater force under

floating than under fixed exchange rates. This magnified
effect is ascribed to currency depreciations of the

transmitted countries under an expansionary fiscal policy

abroad, whereas the currency of the transmitting country

appreciates. The multipliers of the EPA model have

demonstrated that only a fiscal shock given by the US is the

typical textbook case for such exchange rate movements.

However, non-US expansionary fiscal shocks induce currency

depreciations of the transmitting countries, and yet the

transmission effects are mixed, largely depending upon the

relative magnitude of currency appreciations of the

transmitted countries in relation to the currency of the

transmitting country. Responses of interest rates to fiscal

or expenditure shocks are crucial in determining in which

direction the currency moves under such shocks.

Finally, in the decade of oil crises, the floating

exchange rate regime has greatly helped the Japanese economy

by preventing it from falling into a serious balance of

payments crisis and hence, almost insulated its real output

from adverse effects of oil shocks.
Appendix Table 1 In-Sample Dynamic Simulation Tests of the EPA World Econometric Model (February 1984)

Country	GNP(GDP)	Absorption deflator	Unemployment rate*	Short term interest rate*	Spot exchange rate
fix	flex	fix	flex	fix	flex	fix	flex	fix	flex
U.S.	1.44	1.28	1.33	1.93	0.74	0.58	1.34	1.58	-	5.50
Japan	0.95	1.17	0.85	1.25	0.10	0.10	0.43	0.34	-	4.63
West Germany	0.92	1.03	0.68	0.70	0.40	0.44	0.38	0.35	-	5.35
U.K.	2.84	3.16	2.44	2.93	2.07	2.43	3.80	4.02	-	7.27
France	2.11	2.52	1.17	2.35	0.40	0.41	0.97	1.77	-	15.58
Italy	2.16	2.57	2.65	2.56	0.48	0.49	1.79	3.85	-	11.44
Canada	2.97	2.75	0.66	0.73	1.07	1.02	1.66	1.93	-	2.22
Australia	1.13	1.18	1.30	2.19	0.57	0.58	1.61	1.73	-	5.27
Korea	3.30	2.80	2.86	3.23	0.24	0.25	0.22	0.21	-	-

(Note) 1. Simulations are run for the period from the first quarter of 1976 to the last quarter of 1981.

2. ‘*’ mark indicates root mean square errors (unit; percentage points)

3. Others indicate root mean square percentage errors (unit; %)

4. ‘fix’ stands for exogenous exchange rate case, and ‘flex’ stands for endogenous exchange rate case.
Amano, A., “The EPA World Economic Model: An Overview” presented at the EPA international seminar in October 1982.

Amano, A., E. Kurihara and L. Samuelson. “Trade Linkage Submodel in the EPA World Economic Model”, Economic Bulletin NO.19, July 1980, Economic Research Institute, Economic Planning Agency.

EPA World Model Group, “The Structure and Dynamics of the EPA World Econometric Model”, 1984 (to be available for the EPA International Symposium of March 13-15 1984 and to serve as background paper for part I of this paper)

Fleming, M., “Domestic Financial Policies under Fixed and Floating Exchange Rates,” IMF Staff Papers (November 1962), pp.369-380.

Kouri, P.J.K., “Macroeconomics of Stagflation Under Flexible Exchange Rates”, National Bureau of Economic Research, Working Paper No.868, March 1982.

Mundell, R.A., “A Reply, Capital Mobility and Size”, Canadian Journal of Economics and Political Science, 1964 reprinted as the Appendix to Chap. 18 in Mundell (1968).

Mundell, R.A., International Economics, Macmillan, New York, 1968.

Mussa, M., “Macroeconomic Interdependence and the Exchange Rate Regime”, in R. Dornbusch and J. Frendel, (eds.), International Economic Policy, John Hopkins Press, Baltimore, 1979, pp.160-204.
## (3) 発達障害の早期支援

## 地域生活支援事業(464億円)の内数

市町村で、発達障害等に関して知識を有する専門員が保育所等を巡回し、施設のスタッフや親に対し、障害の早期発見・早期対応のための助言等の支援を行う。

4 障害者への就労支援の推進

146億円(119億円)

(地域生活支援事業計上分を除く)

## (1) 地域就労支援力の強化等による障害者及び企業への職場定着支援の拡充（再掲・62〜ージ参照） 85億円（65億円）

## (2) 多様な障害特性に応じた就労促進の推進 (再掲・62ページ参照)

50億円（43億円）

## (3) 就労支援事業所等で働く障害者への支援

### 9. 8億円及び地域生活支援事業(464億円)の内数

## ①工賃向上のための取組の推進

一般就労が困難な障害者の自立した生活を支援する観点から、就労継続支援 B 型事業所などに対し、経営改善や商品開発、市場開拓等に対する支援を行うとともに、様々な分野で活躍する専門家の技術指導による障害者のスキルアップを図るためのモデル事業を実施することにより、利用者の工賃向上を図る。

また、共同受注窓口の体制整備や、企業等と障害者就労施設等との受発注のマッチングを促進することにより、障害者就労施設等に対する官公需や民需の増進を図る。

## ②障害者就業・生活支援センターによる働く障害者への生活面の支援などの推進

就業に伴う日常生活の支援を必要とする障害者に対し、窓口での相談や職場・家庭訪問等による生活面の支援などを実施する。

また、就労継続支援事業の利用から一般就労への移行や、加齢や重度化による一般就労から就労継続支援事業の利用への移行など障害者の能力に応じた就労の場に移行できるようにするための支援を行う。

## (4) 農福連携による障害者の就農促進【新規】

1.1億円

農業分野での障害者の就労を支援し、障害者の職域拡大や収入拡大を図るとともに、農業の担い手不足解消につなげるため、障害者就労施設へ農業の専門家の派遣、農業に取り組む障害者就労施設によるマルシェの開催等の支援を実施する。