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A Study Into the Information System In Healthcare

By

Mazid Alam

Schiller International University, Heidelberg

A Research Paper submitted to the Schiller International University in fulfilment of the

requirements for a course work in Module IT 500 Management of Information Systems

October 2022

Instructor: Dr. Geoffrey K. Writes

Schiller International
University Business School
Heidelberg, Germany

PERMISSION TO STORE RESEARCH PAPER IN LIBRARY AND MAKE AVAILABLE FOR USE
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I, Mohammad Hussain Nazari, do hereby irrevocably consent to and authorise the

Library of Schiller International University, Heidelberg, to file the attached Research Paper
entitled: A Study into the causes of excessive deficits in japan Economy, and make such
paper available for use, circulation, and reproduction by Library users at the Schiller
International University, Heidelberg.

I state at this time that the contents of this paper are my own work and completely original.

(Signature)

(Date)
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List of Acronyms
GDP Gross Domestic Product
DICJ Deposit Insurance Corporation of Japan
LM Liquidity Money
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A Study into the Causes of Excessive Deficits in japan Economy

Table of Contents Page

Acronyms and Abbreviations 3

Chapter 1
1. Introduction
1.1 Introduction 5
Chapter 2
2. Causes of Excessive Deficits 6
2.1 Banking Behaviour 6
2.2 Diminished Effectiveness of Fiscal Policy 7
2.3 Aging Population 8
2.4 Transfer of Central Government to Local Government 9
2.5 Problem of the IS Curve 9
2.6 High Appreciation of the Yen 10
Chapter 3
3. General Analysis 11
3.1 Empirical Model 11
3.2 Unit Root Test 12
3.3 Empirical Result 13
Chapter 4
4. Remedies 13
4.1 Required Reform and the aging Population 13
4.2 Increasing Female Participation 13
4.3 Reduce Transfer from Central to Local 14

Chapter 5
5. Conclusion 15
Chapter 6
6. References 16
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Introduction
Information system (IS) play an essential role in the automated era in lot of industries.
Information system are tools that help institution or management to maintain their data.
Organizations invest in IS to bring success to their business. The business fundamental
consists of technology, people and processes. These businesses are inactive without proper
data as data is treated as lifeblood of organization (Russom 2012).

All organizations having a common goal defines them as organisations. Organization

includes education institutions, business entities and government department, for example,
healthcare. The main goal of healthcare is to deliver good and fine health to people. The
success of healthcare build upon data that flows within an organization. Data are undoubtedly
the most valuable asset for any organization especially in this digital era. the late Morris F.
Collen, MD, FACMI (1914–2014), Director Emeritus of Kaiser Permanente Medical Care’s
Division of Research noted that “The hospital and its associated information system is the most
complex organizational structure created by people”. He thoroughly believed that information
management systems are compulsory for high-quality, cost-efficient patient care.

A decade later, the US healthcare industry redesigned healthcare to acquire improvement

with triple aim of :
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There are several reasons for this long-term deficits, which will be explained in this paper.
The main reason, is because of Japan’s aging population. Japan has the highest life
expectancy all over the world, but the retirement age is still 60 years old, which will cause in
a diminishing working population as the number of old and retired people is rising while in
another hand the younger generation is shrinking. Typically, old people consume less than
younger generations, so this also leads to the problem of reduced domestic consumption.
Japans excessive deficits factors include the allocation of transfers from the central
government to local governments, and also the less enough capital requirements, which leads
Japanese banks to become unwillingness to lend money to startup businesses and SMEs and
prevent from Japanese innovation and technological progress (Yoshino and Hirano 2011).

In this paper, in the following part will explains the causes of excessive deficits of Japan’s
long-term. The third part presents the empirical analysis and the ineffectiveness of vertical IS
curve and the fiscal policy in explaining the GDP growth after the deficit of the Japanese
economy’s bubble. It also provides an empirical proof for rejecting the liquidity trap for the
Japanese economy and empirically proves the vertical IS curve. The fourth part provides
methods for getting out of the deficits and boosting the economic growth. The fifth part and
final is for the concluding remarks.

2. Causes of excessive deficits in japan

2.1 BankingBehavior
Japanese banks in the 1980s issued loans based on collateral. Prices of Land started to
decrease from 1991 and banks started to acquire bad loan assets and The failure number of
banking started to increase immediately after the outbreak of the bubble and it took a decade
almost for the number of failed banks to reach a peak.

before the burst of the bubble As Figure 2 shows, there were no banking failures and the
Deposit Insurance Corporation of Japan’s (DICJ) financial assistance to banks was almost
zero. The number of failed banks increased Immediately after the burst of the bubble, so the
DICJ, the insuring organization of the financial system, raised financial assistance to help the
banks which are failed.
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2.2 Diminished Effectiveness of Fiscal Policy

The two reasons for Japans lost decade was the banking crisis and the diminished
effectiveness of fiscal policy.
Miyazawa Prime Minister in 1990 implemented fiscal policy when the economy of Japan was
very slow to recover. He wished for a high growth period in Japan where public investment
would work to help increase the Japanese economy. However, lots of highways and bridges
in country had already been completed and new infrastructure investment failed to help the
economy because of decline in the multiplier for public investment.
Public investment has produced low encouragement effects on gross national product due to
ineffectively distribution.
The big public investment has been increasingly focused in rural areas, but is has a much
smaller impact on rural areas than on urban areas, and public investment in the industrial and
service sectors has been more effective than investment in the agriculture (Yoshino and
Sakakibara 2002).

The decline in return to public and privet investment can be seen by the results of
misallocation over time as reported in table 1. During the high-growth period (1955–1969)
the marginal productivity of public capital was high but it declined from 1970 onward. It is
likely happen due to the misallocation of public capital helped lower the rate of return to
private capital as well, because public investments were not removing the infrastructure
bottlenecks which were decreasing the rate of return to private investment.
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2.3 AgingPopulation

Japan has got the highest life expectancy all over the world, but set around 60 years old of
age as a retirement age. Figure 4 shows clearly the drastically diminishing of working
population, and the top portion of elderly population is growing rapidly. The diminishing of
working population and aging population is one of the biggest causes of deficits in Japan.

Additionally, the wage rate system in Japan is based on seniority. Seniority-based wage
systems make it difficult for organizations to hire elderly people. People who are at old age
are forced to retire even though many of them would like to continue working. Due to the
aging population, and cost of social welfare have started to increase and currently one-third
of government spending is assign for social welfare, while the government budget deficit is
increasing every year.
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2.4 TransfersfromtheCentralGovernmenttoLocalGovernment
Figure 5 explains the outgoing of the general account budget of the Government of Japan for
FY2015. Which About 16% of total government spending is assigned for transfer from the
central government to local governments and it is the second-largest government expense
after social security. Local governments have depended on central government transfers
without

making efforts themselves to revitalize regional economies. A fixed distribution system by

agricultural organization has put farmers in a weak position. They are not able to innovate
regarding to their agricultural production.

As is clear, compared to other important expenditure the share of transfers from the central
government to local governments is large like education and science, which is taken only
5.6% of the general account budget. One of the general reasons for this big share is that rural
politicians would like to spend more funds to rural areas in order to get more votes in their
regions. This share should be decrease and spend to other important sectors, and local
governments should rely more on financing privet sector than money from the central
government.

2.5 Problem of the IS Curve

Japan’s excessive deficits is often explained as a liquidity trap. Lots of attention has been
focused on monetary policy rather than structural issues, but the issue of the Japanese
economy was in its vertical IS curve (Figure 6). Although with very low interest rate the
Private investment did not grow. Expectation of future rates of return were low and there was
no improvement in new technological progress.. Even though the short term interest rate was
set to zero by central bank, depressed investment in country meant that it is not able recover
the economy.
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There are many reasons for the vertical IS curve. (i) capacity reaching was made during the
bubble period when organizations significantly invested in various sectors, but demand
suddenly slowed. (ii) High Foreign Direct Investment of Japan to other Asian countries due
to the high appreciation of the yen and high wage rates, and because growth of other Asian
countries was higher it lead to higher demand in those regions. (iii) Marginal productivity of
capital decrease because productive and innovative organizations started to leave the country
and invest abroad, while weaker organizations remained in the country. (iv) Startups could
not grow because banks were insecure to lend to them due to the strict Basel capital
requirements, and leading technological progress to slow down.

2.6 High Appreciations of the Yen

The yen appreciated in the mid-1990s. Figure 7 shows the dollar–yen exchange rate
fluctuations during 1990–2014. Appreciations of the yen lead Japanese manufacturing firms
to move to other Asian countries from Japan. Incline in the wage rate in country also forced
Japanese companies to go abroad. Which result to diminish of domestic product.
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3. EMPIRICAL ANALYSIS

3.1 Empirical Mode

In this section, in order to provide evidence for the statement that the issues in the Japanese
economy are coming from a vertical IS curve and development of an IS-LM model and use
empirical analysis based on it.
In macroeconomic theory and practice developed in the Keynesian model, IS-LM model has
played a central role. A primary version of the model remains the core of many introductory
textbooks, which use it to study the effects of changes in exogenous macroeconomic and
analysis of variables, in addition, the impact of alternative monetary and fiscal policies. The
respected IS-LM model is also the backbone of many of the large-scale, highly economic
forecasting of disaggregated macro econometric models which is used by governments and
commercial organization for the purposes of policy evaluation and economic. More generally,
the IS-LM model has a considerable influence on policy makers and market members’ views
of the economy’s workings, as is clearly explained in the popular business press (Gali 1992).
Below are two equations that component of the simplest possible version of the IS-LM
model, and later explained the use these equations simultaneously in order to run our
empirical analysis. The first The IS Equation is our simultaneous equation model (SEM). The
IS equation can be used to represent the equilibria where total private investment equals
total savings. Every point on the curve represents the equilibrium between investment and
savings. The LM equation is the second part of the SEM . The LM equation represents the
combinations of interest rates and levels of real income for which the money market is in
equilibrium. The LM represent the set of equilibrium marks between the money supply
function and liquidity
preference function. The exact money demand contain of two main parts: (i) transactional
demand which refers to function of real GDP, and (ii) speculative demand, that refers to the
function of interest rate.

y = α − s (i − E∆p+1 ) + uis (IS equation)

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m − p = β + φy − li + ulm. (LM equation)

where y indicate the log of real GDP, the nominal long-term interest rate is i, p and m are,
respectively, the money supply and logs of the price level. uis and ulm are stochastic process
Explaining money supply and money demand (LM) and spending (IS) driving forces. ∆ and
E refers to the usual first difference and expectational operators, respectively. In order to use
the empirical analysis for GDP, it states Japanese real GDP deflated by the GDP deflator
(2009=100), quarterly adjusted using an X-12 quarterly seasonal adjustment way. Which is
long term used the interest rate and the 10-year government bond yield, safe asset interest
rate. the general consumer price index for Japan refer to the price level. For the money
supply, for Japanese M1, seasonally explained using an X-12 quarterly seasonal adjustment
method. Japan in 1998 was going through a financial crisis and fluctuations of deposits
were not consistent with economic fluctuations. Drastically The money multiplier changed
after Japan’s banking crisis and M2 shows very unusual movements in the following 10
years. Which is the reason we used M1 instead of M2.
Quarterly data from Q2 1990–Q4 2013 are used in this analysis. All element except the
interest rate are in logarithmic form. The data are taken from Nikkei Needs and the Bank of
Japan database source.

3.2 UnitRootTest
to evaluate in order the stationarity of all succession, the unit root test is used on all variables
at levels and first differences for two cases: (i) with an intercept, (ii) with trend an intercept.
and the results are explained in Table 2.

The outcome contain that almost all variables are non-stationary in levels. These variables
contain the real interest rate, real GDP. Real money supply and nominal interest rate.
However, the first distinction for all variables show stationary results. The real interest rate,
nominal interest rate, real GDP are suggested in the result. and each contain the real money
supply in unit root. After performance of unit test it was found that the variables were non-
stationary in level and stationary in first differences.

3.3 EmpiricalResults
This subsection carry our empirical results for the IS-LM simultaneous equation model. the
IS equation is equation 1 and the LM equation is the 2nd equation which are also estimated
by the iterative seemingly unrelated regression (ISUR). This Method uses information about
the relation among error terms all over the equation working to improve the efficiency of the
estimated parameter.

the results for the IS equation is the first part of table 3, that explain the relationship between
real GDP and the real long-term interest rate. when the real interest rate goes down,
investment should go up, so the IS curve should be downward slopping according economic
textbook. However,, if the current inflation rate remains the following year, or in the case of
perfect inflation foresight as our empirical results show, in both cases, there is no important
association
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between the real interest rate and real GDP of Japan during Q2 1990–Q4 2013. It means that
when the interest rate was low, investment did not accelerate, which is evidence of the
vertical IS curve that can be seen in Figure 6. This finding is in relation with the finding of no
important association between the real GDP and long-term real interest rate of Japan during
the period of Q2 2002– Q2 2014 (Yoshino and Taghizadeh-Hesary 2015b). The effect of
GDP gap had a important impact on the current value of GDP.
LM equation is the second part of the empirical result, that indicate the combinations of
interest rates and levels of real income yt for which the money market is in equilibrium. The
LM works is the set of equilibrium points between the the money supply (m-p)t and
the liquidity preference function. The LM curve is on y-axis and the interest rate and the x-
axis is real GDP ( yt ). LM curve is usually slopping upward and the empirical results for Q2
1990–Q4.
2013 of the country are in accordance with an upward increasing of LM. Demand of Money
consists of two parts: (i) transactional demand, that is use for function of real income, and (ii)
speculative demand, that is use for function of the interest rate. The results are in according to
economic theory.

4. Remedies

4.1 Required Reforms and the Aging Population

Therefore with an aging population, the decreasing working population it causes a shift down
the production function, which result in a drastic decrease in the marginal production of
capital. That results in becoming reluctant to invest for companies, despite low interest rates
for Japan with evidence for the vertical IS curve.
Early retirement and An aging population are some of the key factor of contributing to
Japan’s slow economic activity. Rate of Wages should be based on productivity rather than
seniority. It is easy for organizations to hire elderly people if their wage rates are set
according to productivity. finding jobs should be based on their healthy elderly and
experience the age of retirement should be postponed to counteract the diminishing working
population.

4.2 Increasing Female Participation in the Economy

Female participation in the japan economy is far lower than many other emerging and
advanced economies. This may be because of several social factors, but there are many ways
to increase female participation in the economy.

In Japan like many other countries females usually going start work after graduation. But in
many situations they leave their job after having children and dedicate time to childcare.
Figure 9 explains the percentage of female employees by size of organisation. This shows
that as much smaller the enterprise as the higher the percentage of female employees. This is
due to many micro enterprises are family run and wives work together with their husbands
while working in their business on a part time basis even if having children. As is clear from
the figure female participation is lower in large enterprises, This is because big organizations
generally have less flexibility so it is difficult for working mothers to manage work and
taking care of their children at the same time.
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4.3 Reduce Transfers from the Central to Local Governments

Money comes from the central bank without any interest payment that is why Local
government officials may not be concerned about the rate of return of the transfers. So if local
government project is in need of private sector finance, it should to be invested in high profit
sectors, otherwise investing in rural regions will not interested by the private sector in Japan.
Local governments should work for an incentive mechanism to reduce transfers from the
central government. Local governments are in willing to receive transfers from the central
government rather than fund raising from private sectors, but only limited transfers encourage
the raising of funds from the private sector should provide by central government.
partnerships of public-privet sector and hometown investment trust funds (Yoshino 2013)
must also be increased.
It has to be clearly defined the Government spending between the central and local
governments. The taxes allocation between the local government and central government
must be determined together with expenditure.
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5. Conclusion
In this paper, the causes of excessive deficits in Japan after the burst of the bubble in the
1990s have been examined with The empirical analysis of this paper showed that the lack of
development of the Japanese economy comes from its vertical IS curve. This is due to the
impact of fiscal policy to decline drastically, so the economy of Japan was faced with
structural problems rather than a temporary decline. The empirical analysis rejects the idea of
liquidity trap for the Japanese economy. Due to the aging population in Japan, the function of
production became flatter and flatter. This caused by the marginal productivity of capital to
decrease, becoming vertical by contributing to the IS curve is Also because of the aging
population, cost of social security in the country have increased significantly. Aging
population Almost cost one third of the government budget and resulting in budget deficit to
increase considerably.
Hence, the structural issues have comes from the aging population and the decline in
effectiveness of fiscal policy, and the of transfers allocation from the central government to
local governments that contain about 18% of total government spending. The high rate of
spending has weakened sectors such as the agriculture sector.
Japanese currency yen was another reason that slowed economic growth by large
appreciation. High appreciation of the Japanese currency in the mid-1990s forced Japanese
manufacturing organisation to move from Japan to other Asian countries. Increases to wage
rate of the country also forced Japanese companies to go abroad and as a result domestic
production started to vanish.
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