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“Lost Decade†in Translation

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Author Info

  • Kiichi Tokuoka
  • Murtaza H. Syed
  • Kenneth Kang

Abstract

Is the recovery from the global financial crisis now secured? A strikingly similar crisis that stalled Japan''s growth miracle two decades ago could provide some clues. This paper explores the parallels and draws potential implications for the current global outlook and policies. Japan''s experiences suggest four broad lessons. First, green shoots do not guarantee a recovery, implying a need to be cautious about the outlook. Second, financial fragilities can leave an economy vulnerable to adverse shocks and should be resolved for a durable recovery. Third, well-calibrated macroeconomic stimulus can facilitate this adjustment, but carries increasing costs. And fourth, while judging the best time to exit from policy support is difficult, clear medium-term plans may help.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/282.

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Length: 40
Date of creation: 01 Dec 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/282

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Related research

Keywords: Banking crisis; Banking sector; Central bank policy; Economic recovery; Global Financial Crisis 2008-2009; Liquidity management; Public investment; banking; deposit insurance; financial system; banking system; bank of japan; financial sector; financial markets; financial institutions; stock market; bonds; bond; financial market; government bond; interest rate policy; regulatory forbearance; recapitalization; bank balance sheets; financial services; discounted cash flow; loan classification; bank capital; government bonds; liquidity support; cash flow; money market; financial stability; central banking; bank for international settlements; bank lending; foreign exchange; bank credit; corporate bonds; government bond yields; tier 1 capital; asset bubbles; asset management company; bank losses; bank assets; discount rate; excess liquidity; bond yields; money markets; financial systems; interbank market; bank asset; money market rate; banknotes; bank balance sheet; bank profits; financial vulnerabilities; subordinated debt; bond purchases; bank risk; deposit insurance scheme; bank asset quality; bank liabilities; bank restructuring; bankruptcies; international financial system; valuation of assets; stock market index; bank bailouts; bank management; bank policy; bank recapitalization; macroeconomic stability; stock holdings; banking law reform; debt stock; banking sector problems; debt restructuring; bank equity; banking law; capital base; banknote; financial regulation; capital adequacy; moral hazard;

This paper has been announced in the following NEP Reports:

References

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  1. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "The Aftermath of Financial Crises," NBER Working Papers 14656, National Bureau of Economic Research, Inc.
  2. Athanasios Orphanides, 2004. "Monetary policy in deflation: the liquidity trap in history and practice," Finance and Economics Discussion Series 2004-01, Board of Governors of the Federal Reserve System (U.S.).
  3. Naohiko Baba & Motoharu Nakashima & Yosuke Shigemi & Kazuo Ueda, 2005. "The Bank of Japan's Monetary Policy and Bank Risk Premiums in the Money Market," CIRJE F-Series CIRJE-F-339, CIRJE, Faculty of Economics, University of Tokyo.
  4. Valerie Cerra & Sweta Chaman Saxena, 2008. "Growth Dynamics: The Myth of Economic Recovery," American Economic Review, American Economic Association, vol. 98(1), pages 439-57, March.
  5. Thomas F. Cargill & Michael M. Hutchison & Takatoshi Ito, 2001. "Financial Policy and Central Banking in Japan," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262032856, December.
  6. Kenneth N. Kuttner & Adam S. Posen, 2002. "Passive Savers and Fiscal Policy Effectiveness in Japan," Working Paper Series WP02-2, Peterson Institute for International Economics.
  7. Kiichi Tokuoka, 2010. "The Outlook for Financing Japan's Public Debt," IMF Working Papers 10/19, International Monetary Fund.
  8. Hoshi, Takeo & Kashyap, Anil K, 2010. "Will the U.S. bank recapitalization succeed? Eight lessons from Japan," Journal of Financial Economics, Elsevier, vol. 97(3), pages 398-417, September.
  9. Takeo Hoshi & Anil Kashyap, 1999. "The Japanese Banking Crisis: Where Did It Come From and How Will It End?," NBER Working Papers 7250, National Bureau of Economic Research, Inc.
  10. Ricardo J. Caballero & Takeo Hoshi & Anil K. Kashyap, 2008. "Zombie Lending and Depressed Restructuring in Japan," American Economic Review, American Economic Association, vol. 98(5), pages 1943-77, December.
  11. Reinhart, Carmen M. & Rogoff, Kenneth S., 2009. "The Aftermath of Financial Crises," Scholarly Articles 11129155, Harvard University Department of Economics.
  12. Fujiki, Hiroshi & Okina, Kunio & Shiratsuka, Shigenori, 2001. "Monetary Policy under Zero Interest Rate: Viewpoints of Central Bank Economists," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 19(1), pages 89-130, February.
  13. Motonishi, Taizo & Yoshikawa, Hiroshi, 1999. "Causes of the Long Stagnation of Japan during the 1990s: Financial or Real?," Journal of the Japanese and International Economies, Elsevier, vol. 13(3), pages 181-200, September.
  14. Antonio Spilimbergo & Steve Symansky & Olivier Blanchard & Carlo Cottarelli, 2009. "Fiscal Policy For The Crisis," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 10(2), pages 26-32, 07.
  15. Kenneth N. Kuttner & Adam S. Posen, 2001. "The Great Recession: Lessons for Macroeconomic Policy from Japan," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(2), pages 93-186.
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Cited by:
  1. Lin, Justin Yifu & Doemeland, Doerte, 2012. "Beyond Keynesianism : global infrastructure investments in times of crisis," Policy Research Working Paper Series 5940, The World Bank.

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