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The Goal of Fiscal, Structural and Monetary Policy

In: New Paradigm in Macroeconomics

Author

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  • Richard A. Werner

Abstract

We have confirmed that the cause of Japan’s recession has been the sharp reduction in credit creation that began in 1992 and was triggered by the bad debts in the banking system. We have also found that this was due to excessive loan growth quotas imposed on the banks by the Bank of Japan during the 1980s. Finally, we found that the problem of lack of credit during the 1990s could easily have been solved through monetary policy. Bad debts could have been taken off the banks’ balance sheets without costs by the central bank. Even without bank lending, the central bank could have created a recovery a decade ago, by significantly increasing its own credit creation. In other words, Japan’s recession of the 1990s has been the result of the Bank of Japan’s policies.2

Suggested Citation

  • Richard A. Werner, 2005. "The Goal of Fiscal, Structural and Monetary Policy," Palgrave Macmillan Books, in: New Paradigm in Macroeconomics, chapter 22, pages 307-320, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-50607-7_23
    DOI: 10.1057/9780230506077_23
    as

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