Hidden Bibliographic Details
| Other authors / contributors: | International Monetary Fund. Research Department.
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| ISBN: | 1462384013
9781462384013
1452782342
9781452782348
1282844334
9781282844339
9786612844331
6612844337
1451873794
9781451873795
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| Digital file characteristics: | text file
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| Notes: | Includes bibliographical references (pages 28-32).
English.
Print version record.
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| Summary: | This paper investigates how monetary policy can help ward off a protracted deflationary slump when policy rates are near the zero bound by studying the experience of Japan during the "Lost Decade" which followed the asset-price bubble collapse in the early 1990s. Estimation results based on a structural model suggest that the Bank of Japan's interest-rate policy fits a conventional forward-looking reaction function with an inflation target of about 1 percent. The disappointing economic performance thus seems primarily due to a series of adverse economic shocks rather than an extraordinary policy error. In addition, counterfactual policy simulations based on the estimated structural model suggest that simply raising the inflation target would not have yielded a lasting improvement in performance. However, a price-targeting rule or a policy rule that combined a higher inflation target with a more aggressive response to output would have achieved superior stabilization results
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| Other form: | Print version: Leigh, Daniel. Monetary policy and the lost decade. [Washington, D.C.] : International Monetary Fund, ©2009
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