Determinants of US Fiscal Outlook - Structural Analysis Based on Gravity Model

This report analyzes the structural analysis of factors determining US fiscal outlook published by the Cabinet Office Economic and Fiscal Analysis Division. Research Background and Objectives This Discussion Paper (DP25-4) presents research results by Kengo Araki of the Economic and Social Research Institute, Cabinet Office, aiming to clarify what factors determine US fiscal outlook through structural analysis methods based on gravity models. Understanding the decision-making mechanisms is crucial for Japan's economic policy formulation, as US fiscal policy significantly impacts the global economy. Gravity Model Analysis Method This research uses a gravity model, an economic analysis method, to structurally analyze the US fiscal outlook decision-making process. The gravity model is a method that formulates interactions between economic entities analogous to the law of gravity in physics, and is an appropriate analytical tool for revealing structural relationships behind complex economic phenomena. Determinants of US Fiscal Policy The analysis systematically examines various economic and political factors affecting US fiscal outlook and quantitatively evaluates their relative importance and interaction mechanisms. Detailed analysis based on empirical data is conducted on how macroeconomic indicators, political factors, institutional constraints, and other factors influence fiscal outlook formation. Policy Implications The research results provide a theoretical foundation for predicting US fiscal policy trends and evaluating their spillover effects on the Japanese economy. They also provide knowledge that contributes to consideration of more effective policy coordination and response measures in Japan's fiscal policy formulation through understanding US policy decision-making processes. The article evaluates this as important research that scientifically clarifies the decision-making mechanisms of US fiscal policy using the advanced analytical method of gravity models, providing useful theoretical and empirical knowledge for Japan's economic policy formulation.