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Monetary Policy Under the Zero Interest Rate Constraint and Balance Sheet Adjustment

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  • Shirakawa, Masaaki

Abstract

There are two contrasting evaluations of the conduct of Japan's monetary policy since the early 1990s. One is that monetary policy has not been eased enough to promote economic recovery in Japan. The other is that, since monetary policy has already been substantially eased, further easing would not contribute to economic recovery, but would rather delay the progress of structural reform that is a prerequisite for sustainable economic growth. With these evaluations in mind, this paper examines the effect of monetary policy in general and the effect of so-called "quantitative easing" in particular when nominal short-term interest rates are zero and balance sheet adjustment is in progress. Copyright 2001 by Blackwell Publishers Ltd.

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  • Shirakawa, Masaaki, 2001. "Monetary Policy Under the Zero Interest Rate Constraint and Balance Sheet Adjustment," International Finance, Wiley Blackwell, vol. 4(3), pages 463-489, Winter.
  • Handle: RePEc:bla:intfin:v:4:y:2001:i:3:p:463-89
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    Cited by:

    1. Joerg Bibow, 2004. "Fiscal Consolidation Contrasting Strategies & Lessons from International Experience," Macroeconomics 0402014, EconWPA.
    2. Floro, Danvee & Tesfaselassie, Mewael F., 2013. "Can forward guidance be ambiguous yet effective?," Kiel Policy Brief 65, Kiel Institute for the World Economy (IfW).
    3. Rishi Goyal & Ronald McKinnon, 2002. "Japan's Negative Risk Premium in Interest Rates: The Liquidity Trap and Fall in Bank Lending," Working Papers 02006, Stanford University, Department of Economics.
    4. Robert N McCauley & Kazuo Ueda, 2009. "Government debt management at low interest rates," BIS Quarterly Review, Bank for International Settlements, June.

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