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Understanding the Costs of Deflation in the Japanese Context

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Author Info
Taimur Baig
Abstract

This paper examines the cost of deflation in the context of Japan's ongoing deflationary episode. The impact of deflation owing to the zero interest rate bound on monetary policy, wage rigidity, redistribution of wealth from debtor to creditor, and inflexibilities in the financial sector are examined. It is seen that the generalized decline in the Japanese price level, however gradual or mild, has substantially exacerbated the economy's adjustment process under already difficult economic conditions.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/215.

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Length: 26 pages
Date of creation: 17 Nov 2003
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Handle: RePEc:imf:imfwpa:03/215

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Keywords: Deflation ; Japan ; Monetary policy ; Wages ; Financial sector ;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Buiter, Willem H, 2003. "Deflation: Prevention and Cure," CEPR Discussion Papers 3869, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Ben S. Bernanke & Mark Gertler, 2001. "Should Central Banks Respond to Movements in Asset Prices?," American Economic Review, American Economic Association, vol. 91(2), pages 253-257, May. [Downloadable!] (restricted)
  3. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1996-1), pages 1-76. [Downloadable!]
  4. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-76, June. [Downloadable!] (restricted)
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  5. Chris Faulkner-MacDonagh & Taimur Baig & Jörg Decressin & Tarhan Feyzioglu & Manmohan S. Kumar, 2003. "Deflation: Determinants, Risks, and Policy Options," IMF Occasional Papers 221, International Monetary Fund.
  6. Okina, Kunio & Shiratsuka, Shigenori, 2002. "Asset Price Bubbles, Price Stability, and Monetary Policy: Japan' s Experience," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 20(3), pages 35-76, October. [Downloadable!]
  7. Tony Yates, 2002. "Monetary policy and the zero bound to interest rates: a review," Working Paper Series 190, European Central Bank. [Downloadable!]
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  1. Nicolas Canry & Julien Fouquau & Sébastien Lechevalier, 2007. "Price Dynamics in Japan (1981-2001): A StructuralAnalysis of Mechanisms in the Goods and LaborMarkets," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00140624_v1, HAL. [Downloadable!]
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