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The Zero Interest Rate Floor (ZIF) and its Implications for Monetary Policy in Japan

  • Benjamin Hunt


  • Douglas Laxton

    (International Monetary Fund,

This paper uses the IMF’s macroeconomic model MULTIMOD to examine the implications of the zero interest rate floor (ZIF) for the design of monetary policy in Japan. Similar to findings in other studies, targeting rates of inflation lower than 2.0 per cent significantly increases the likelihood of the ZIF becoming binding. Systematic monetary policy strategies that respond strongly to stabilise output and inflation, or that incorporate some explicit price-level component, can help to mitigate the implications of the ZIF.

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Article provided by National Institute of Economic and Social Research in its journal National Institute Economic Review.

Volume (Year): 187 (2004)
Issue (Month): 1 (January)
Pages: 76-92

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Handle: RePEc:sae:niesru:v:187:y:2004:i:1:p:76-92
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