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Monetary Policy with Very Low Inflation in the Pacific Rim

Editor

Listed:
  • Ito, Takatoshi
  • Rose, Andrew K.

Abstract

Extremely low inflation rates have moved to the forefront of monetary policy discussions. In Asia, a number of countries—most prominently Japan, but also Taiwan and China—have actually experienced deflation over the last fifteen years. Monetary Policy with Very Low Inflation in the Pacific Rim explores the factors that have contributed to these circumstances and forecasts some of the potential challenges faced by these nations, as well as some potential solutions. The editors of this volume attribute low inflation and deflation in the region to a number of recent phenomena. Some of these episodes, they argue, may be linked to rapid growth on the supply side of economies. Here, inadequate demand policy can produce what is referred to as a "liquidity trap" in which the expectation of falling prices encourages agents to defer costly purchases, thereby discouraging growth. Low inflation rates can also be traced to the presence of a "zero-lower bound" on interest rates, as well as the inflation-targeting phenomenon. Targets have been set so low, the editors argue, that in some cases a few bad shocks lead to deflation.

Suggested Citation

  • Ito, Takatoshi & Rose, Andrew K. (ed.), 2006. "Monetary Policy with Very Low Inflation in the Pacific Rim," National Bureau of Economic Research Books, University of Chicago Press, edition 0, number 9780226378978, June.
  • Handle: RePEc:ucp:bknber:9780226378978
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    Cited by:

    1. Cavallo, Michele & Del Negro, Marco & Frame, W. Scott & Grasing, Jamie & Malin, Benjamin A. & Rosa, Carlo, 2018. "Fiscal implications of the Federal Reserve's balance sheet normalization," Staff Reports 833, Federal Reserve Bank of New York.
    2. Mark Gertler & Nobuhiro Kiyotaki, 2015. "Banking, Liquidity, and Bank Runs in an Infinite Horizon Economy," American Economic Review, American Economic Association, vol. 105(7), pages 2011-2043, July.
    3. Takatoshi Ito, 2016. "Japanization: Is it Endemic or Epidemic?," NBER Working Papers 21954, National Bureau of Economic Research, Inc.
    4. Takatoshi Ito, 2010. "Great Inflation and Central Bank Independence in Japan," NBER Working Papers 15726, National Bureau of Economic Research, Inc.
    5. Jess Diamond & Kota Watanabe & Tsutomu Watanabe, 2016. "The Formation of Consumer Inflation Expectations:Evidence From Japan's Deflation Experience," UTokyo Price Project Working Paper Series 067, University of Tokyo, Graduate School of Economics.
    6. W. R. Garside, 2012. "Japan’s Great Stagnation," Books, Edward Elgar Publishing, number 14624.
    7. Akhand Akhtar Hossain, 2015. "The Evolution of Central Banking and Monetary Policy in the Asia-Pacific," Books, Edward Elgar Publishing, number 14611.
    8. Jess Diamond & Kota Watanabe & Tsutomu Watanabe, 2016. "The Formation of Consumer Inflation Expectations: New Evidence From Japan's Deflation Experience," CARF F-Series CARF-F-388, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.

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