Effectiveness of state-contingent monetary policy under a liquidity trap

Ippei Fujiwara, Naoko Hara, Kentaro Yoshimura

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

Recent economic developments in Japan suggest that there is a growing interest in how monetary policy should be conducted under low inflation and nominal interest rates. In this paper, we first confirm the effectiveness of conventional wisdom against a liquidity trap, namely taking aggressive responses around the zero bound and variant of price level targeting so that it can intensify the policy duration effect, in the large scale dynamic general equilibrium model, the JEM (Japanese Economic Model). We then show that the optimal tangible policy rules around the zero bound are possibly state-contingent at the same time. J. Japanese Int. Economies 20 (3) (2006) 364-379.

Original languageEnglish
Pages (from-to)364-379
Number of pages16
JournalJournal of the Japanese and International Economies
Volume20
Issue number3
DOIs
Publication statusPublished - 2006 Sep
Externally publishedYes

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price level
liquidity
equilibrium model
economic model
monetary policy
interest rate
inflation
wisdom
Japan
economy
economics
Monetary policy
Zero bound
Liquidity trap
Policy rules
Optimal policy
Wisdom
Price level targeting
Japanese economy
Economic development

Keywords

  • Monetary policy
  • Zero bound of nominal interest rates

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance

Cite this

Effectiveness of state-contingent monetary policy under a liquidity trap. / Fujiwara, Ippei; Hara, Naoko; Yoshimura, Kentaro.

In: Journal of the Japanese and International Economies, Vol. 20, No. 3, 09.2006, p. 364-379.

Research output: Contribution to journalArticle

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