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Japanese Macroeconomic Policy and the Current Account Under Alternative International Monetary Regimes

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  • John B. Taylor

    (Professor, Stanford University)

Abstract

Empirical estimates of the effect of monetary and fiscal policy on the Japanese current account are provided. To assess the quantitative importance of international monetary factors, these estimates are computed under three different exchange rate regimes: flexible exchange rates, fixed exchange rates with a "yen standard" and fixed exchange rates with a "multi-currency standard." For all exchange rate regimes, monetary policy has a much smaller impact on the current account than fiscal policy, but the impact of fiscal policy on the current account is even larger when exchange rates are fixed than when exchange rates are flexible. The estimates are based on a quarterly multicountry econometric model with rational expectations estimated during the 1972-1986 period.

Suggested Citation

  • John B. Taylor, 1988. "Japanese Macroeconomic Policy and the Current Account Under Alternative International Monetary Regimes," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 6(1), pages 1-36, May.
    • Handle: RePEc:ime:imemes:v:6:y:1988:i:1:p:1-36
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    File URL: http://www.imes.boj.or.jp/research/papers/english/me6-1-1.pdf
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    Cited by:

    1. Alpo Willman, 1989. "If the markka floated : simulating the BOF4 model with fixed and floating exchange rates," Finnish Economic Papers, Finnish Economic Association, vol. 2(1), pages 3-19, Spring.
    2. Bennett T. McCallum, 1995. "Monetary Policy Rules and Financial Stability," Palgrave Macmillan Books, in: Kuniho Sawamoto & Zenta Nakajima & Hiroo Taguchi (ed.), Financial Stability in a Changing Environment, chapter 9, pages 389-438, Palgrave Macmillan.
    3. repec:zbw:bofrdp:1988_017 is not listed on IDEAS
    4. Rod Tyers & Jenny Corbett, 2012. "Japan's economic slowdown and its global implications: a review of the economic modelling," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 26(2), pages 1-28, November.
    5. Alpo Willman, 1989. "If the markka floated : simulating the BOF4 model with fixed and floating exchange rates," Finnish Economic Papers, Finnish Economic Association, vol. 2(1), pages 3-19, Spring.

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