The Japanese Economy and Economic Policy in Light of the East Asian Financial Crisis
AbstractThe depth and breadth of the East Asian financial crisis has added a sense of acute urgency for some concrete and credible measures by policy-makers to revitalise the Japanese economy. While steps to be taken for the long-run competitiveness and economic revitalisation of the Japanese economy are clear (with the only doubt being about whether and how effectively they will be implemented), those needed to boost aggregate demand in the shortrun are far less obvious. Given the near-zero nominal interest rates in Japan, most observers argue that an expansionary monetary policy would be ineffective. However, as with Krugman (1998a,b), we argue that once a distinction is made between real and nominal interest rates, it is logically possible for monetary policy to be effective in raising demand if it is able to create inflationary expectations. This could probably be effected through explicit announcements by the Bank of Japan of the intention to target a certain inflation rate in the future.
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Bibliographic InfoPaper provided by East Asian Bureau of Economic Research in its series Macroeconomics Working Papers with number 22382.
Date of creation: Jan 1998
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Japanese economy; economic policy; East Asia; financial crisis;
Other versions of this item:
- Ramkishen Rajan, 2010. "The Japanese Economy and Economic Policy in Light of the East Asian Financial Crisis," Working Papers id:2695, eSocialSciences.
- G01 - Financial Economics - - General - - - Financial Crises
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