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Krugman on the Liquidity Trap: Why Inflation Won't Bring Recovery In Japan

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  • Jan A. Kregel

Abstract

Paul Krugman has argued that Japan is in a liquidity trap and that it can recover only if the central bank there follows a policy of "credible inflation." This paper argues that Krugman's proposal, which is similar to what Fisher proposed during the depression, is based on a different interpretation of the liquidity trap from that proposed by Keynes and as a result his policy recommendations can result in neither the elimination of the trap nor in Japan's economic recovery.

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Bibliographic Info

Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_298.

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Date of creation: Mar 2000
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Handle: RePEc:lev:wrkpap:wp_298

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Web page: http://www.levyinstitute.org

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  1. Nominal Prices and Output Gaps
    by rsj in windyanabasis on 2011-06-08 04:20:02
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Cited by:
  1. Mauro Boianovsky, 2003. "The IS-LM Model and the Liquidity Trap Concept: from Hicks to Krugman," Anais do XXXI Encontro Nacional de Economia [Proceedings of the 31th Brazilian Economics Meeting] a13, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  2. Joerg Bibow, 2004. "Fiscal Consolidation Contrasting Strategies & Lessons from International Experience," Macroeconomics 0402014, EconWPA.
  3. Peter Spahn, 2007. "Real Interest Rates, Intertemporal Prices and Macroeconomic Stabilization A Journey Through the History of Economic Thought," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 292/2007, Department of Economics, University of Hohenheim, Germany.

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