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A Myth of "the Keynesian before Keynes:" Low Interest Rate Policy in the Early 1930s in Japan

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Author Info
Masato Shizume (Research Institute for Economics and Business Administration, Kobe University)
Abstract

Departing from the gold standard was the necessary condition for early recovery from the Great Depression in 1930s (Eichengreen and Sachs[1985]). Then, was it the sufficient condition for an independent monetary policy? I explore Japan's monetary policy during the interwar period, focusing on the macroeconomic policy innovation in the early 1930s. I explore the view of the Japanese policymakers at that time, making use of newly available archives from the Bank of Japan. I derive a new series of representative long-term interest rate data from the market price of one particular government bond. Then, I explore the relationship between long-term interest rates of Japan and the two financial centers, Great Britain and the United States. The Japanese experience shows how strong the Golden Fetters were during the post-gold-standard era. The institution of the gold standard had an enduring influence on Japanese policymakers, even after its constraints were no longer formally binding.

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File URL: http://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/dp191.pdf
File Format: application/pdf
File Function: First version, 2006
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Publisher Info
Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number 191.

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Length: 41 pages
Date of creation: Jun 2006
Date of revision:
Handle: RePEc:kob:dpaper:191

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Find related papers by JEL classification:
E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
N15 - Economic History - - Macroeconomics and Monetary Economics; Growth and Fluctuations - - - Asia including Middle East

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