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Monetary Policy and Natural Disasters: An Extension and Simulation Analysis in the Framework of New Keynesian Macroeconomic Model

Author

Listed:
  • Mitsuhiro Okano

    (Asia Pacific Institute of Research)

Abstract

In this paper, we show that how monetary policy should respond in the aftermath of a rare but large scale natural disaster such as typhoons and earthquakes, using simulation analysis from the view of New Keynesian perspective. Since the conditions for the simulation is different from previous studies, monetary tightening for inflation stabilization does not necessarily have better performance in the aftermath of a disaster shock.

Suggested Citation

  • Mitsuhiro Okano, 2013. "Monetary Policy and Natural Disasters: An Extension and Simulation Analysis in the Framework of New Keynesian Macroeconomic Model," APIR Discussion Paper Series 32, Asia Pacific Institute of Research.
    • Handle: RePEc:aps:wpaper:1332
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    File URL: http://www.apir.or.jp/ja/research/files/2013/03/426.pdf
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    References listed on IDEAS

    as
    1. Emmanuel Farhi & Xavier Gabaix, "undated". "Rare Disasters and Exchange Rates," Working Paper 71001, Harvard University OpenScholar.
    2. Clarida, Richard & Gali, Jordi & Gertler, Mark, 2002. "A simple framework for international monetary policy analysis," Journal of Monetary Economics, Elsevier, vol. 49(5), pages 879-904, July.
    3. Pappa, Evi, 2004. "Do the ECB and the fed really need to cooperate? Optimal monetary policy in a two-country world," Journal of Monetary Economics, Elsevier, vol. 51(4), pages 753-779, May.
    4. Benjamin D. Keen & Michael R. Pakko, 2007. "Monetary policy and natural disasters in a DSGE model: how should the Fed have responded to Hurricane Katrina?," Working Papers 2007-025, Federal Reserve Bank of St. Louis.
    5. Niemann, Stefan & Pichler, Paul, 2011. "Optimal fiscal and monetary policies in the face of rare disasters," European Economic Review, Elsevier, vol. 55(1), pages 75-92, January.
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    More about this item

    Keywords

    ;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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