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Monetary Policy under Zero Interest Rate: Viewpoints of Central Bank Economists

Author

Listed:
  • Fujiki, Hiroshi

    (Institute for Monetary & Econ Studies, Bank of Japan)

  • Okina, Kunio

    (Institute for Monetary & Econ Studies, Bank of Japan)

  • Shiratsuka, Shigenori

    (Institute for Monetary & Econ Studies, Bank of Japan)

Abstract

Various proposals have been raised with respect to a desirable framework of monetary policy under the zero interest rate in Japan. By taking due account of such proposals, this paper intends to examine monetary policy options under the environment of the zero interest rate. In so doing, we first describe the policy framework of the "zero interest rate policy," which was in place from February 1999 to August 2000, and its transmission mechanism. Then, in view of the problems intrinsic to the zero interest rate, we address three important questions: (1) the policy options that might be available in response to future economic developments, (2) the major risks associated with these policy options; and (3) how such risks might change under varying economic conditions. On this basis, we finally consider the medium- and long-term "style" of monetary policy in Japan in order to improve its effectiveness and efficiency.

Suggested Citation

  • 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.
  • Handle: RePEc:ime:imemes:v:19:y:2001:i:1:p:89-130
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    File URL: http://www.imes.boj.or.jp/research/papers/english/me19-1-4.pdf
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    References listed on IDEAS

    as
    1. Kuttner, Kenneth N. & Posen, Adam S., 1999. "Does talk matter after all? Inflation targeting and central bank behavior," CFS Working Paper Series 1999/04, Center for Financial Studies (CFS).
    2. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
    3. Marvin Goodfriend, 2000. "Overcoming the zero bound on interest rate policy," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, pages 1007-1057.
    4. Shiller, Robert J. & Huston McCulloch, J., 1990. "The term structure of interest rates," Handbook of Monetary Economics,in: B. M. Friedman & F. H. Hahn (ed.), Handbook of Monetary Economics, edition 1, volume 1, chapter 13, pages 627-722 Elsevier.
    5. McCallum, Bennett T, 1995. "Two Fallacies Concerning Central-Bank Independence," American Economic Review, American Economic Association, vol. 85(2), pages 207-211, May.
    6. Okina, Kunio & Shirakawa, Masaaki & Shiratsuka, Shigenori, 2001. "The Asset Price Bubble and Monetary Policy: Japan's Experience in the Late 1980s and the Lessons: Background Paper," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 19(S1), pages 395-450, February.
    7. Bennett T. McCallum, 2000. "Theoretical analysis regarding a zero lower bound on nominal interest rates," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, pages 870-935.
    8. Tommaso Padoa-Schioppa, 1996. "Styles of Monetary Management," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 14(1), pages 40-64, July.
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    More about this item

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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