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Policy reform and optimal inflation rate for Japan in computable OLG economy

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  • Shimasawa, Manabu
  • Sadahiro, Akira

Abstract

We build a computable OLG model with monetary growth to calculate the optimal level of inflation rate for Japan, and to study policy reforms make any quantitative impacts on it. Four main results were obtained: (i) the optimal inflation rate for Japan is calculated around 1.0%; (ii) the calculated underlying inflation rate is about 9% under the present Japanese economic and fiscal situation; (iii) to prevent high inflation, fiscal reconstruction needs to be implemented; and (iv) if fundamental fiscal reform is conducted, the optimal inflation rate might be achieved. These results are very robust to calibration.

Suggested Citation

  • Shimasawa, Manabu & Sadahiro, Akira, 2009. "Policy reform and optimal inflation rate for Japan in computable OLG economy," Economic Modelling, Elsevier, vol. 26(2), pages 379-384, March.
    • Handle: RePEc:eee:ecmode:v:26:y:2009:i:2:p:379-384
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    Cited by:

    1. Thi Hong Van Hoang & Amine Lahiani & David Heller, 2016. "Is gold a hedge against inflation? New evidence from a nonlinear ARDL approach," Post-Print hal-02012307, HAL.
    2. Hagiwara, Reona, 2020. "Seigniorage and Japanese fiscal sustainability: Simulation analysis using an overlapping generations model," Economic Modelling, Elsevier, vol. 84(C), pages 340-356.
    3. Hoang, Thi Hong Van & Lahiani, Amine & Heller, David, 2016. "Is gold a hedge against inflation? New evidence from a nonlinear ARDL approach," Economic Modelling, Elsevier, vol. 54(C), pages 54-66.

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