Monetary Policy in a Liquidity Trap: What Have We Learned, and to What End?
AbstractReflecting recent economic developments in Japan, there is a growing interest in how monetary policy should be conducted under low inflation and nominal interest rates. Among several proposed solutions, the conventional wisdom seems to be to commit to lower future short-term nominal interest rates through some variation on price-level targeting. We confirm the effectiveness of such a policy in a large-scale dynamic general equilibrium model: the Japanese Economic Model. However, uncertainty - which affects how monetary policy should be conducted - increases in the presence of the zero bound on nominal interest rates. We posit that the increased uncertainty may explain why the central bank cannot fully commit to a certain fully specified policy scheme far into the future when the economy is caught in a liquidity trap. Copyright Blackwell Publishing Ltd. 2005
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Wiley Blackwell in its journal International Finance.
Volume (Year): 8 (2005)
Issue (Month): 3 (December)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=1367-0271
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Dieppe, Alistair & McAdam, Peter, 2006. "Monetary policy under a liquidity trap: Simulation evidence for the euro area," Journal of the Japanese and International Economies, Elsevier, vol. 20(3), pages 338-363, September.
- Koppány, Krisztián, 2007.
"Likviditási csapda és deflációs spirál egy inflációs célt követő modellben - a hitelesség szerepe
[A liquidity trap and deflationary spiral in a model for pursuing an inflation target - ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(11), pages 974-1003.
- Fujiwara, Ippei & Hara, Naoko & Yoshimura, Kentaro, 2006. "Effectiveness of state-contingent monetary policy under a liquidity trap," Journal of the Japanese and International Economies, Elsevier, vol. 20(3), pages 364-379, September.
- László Bokor, 2010. "Optimality criteria of hybrid inflation-price level targeting," MNB Working Papers 2010/8, Magyar Nemzeti Bank (the central bank of Hungary).
- Hirose, Yasuo, 2007. "Sunspot fluctuations ulnder zero nominal interest rates," Economics Letters, Elsevier, vol. 97(1), pages 39-45, October.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.