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The Role of Preconceived Ideas in Macroeconomic Policy: Japan's Experiences in the Two Deflationary Periods

Author

Listed:
  • Koichi Hamada

    (Economic Growth Center, Yale University)

  • Asahi Noguchi

    (Senshu University)

Abstract

This paper examines the role of misleading economic ideas that most likely promoted the economic disasters of the two deflationary periods in Japanese economic history. Misleading ideas deepened the depression during the interwar years, and erroneous thinking prolonged the stagnation of the Japanese economy since the 1990s. While the current framework of political economy is based on the self-interests of political agents as well as of voters, we highlight the role of ideas in policy making, in particular, in the field of macro-economy where the incidence of a particular policy is not clear to the public. Using two significant examples, this paper illustrates the role of preconceived ideas, in contrast to economic interests, that dominantly influenced economic policy making.

Suggested Citation

  • Koichi Hamada & Asahi Noguchi, 2005. "The Role of Preconceived Ideas in Macroeconomic Policy: Japan's Experiences in the Two Deflationary Periods," Working Papers 908, Economic Growth Center, Yale University.
    • Handle: RePEc:egc:wpaper:908
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    File URL: http://www.econ.yale.edu/growth_pdf/cdp908.pdf
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    References listed on IDEAS

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    Cited by:

    1. Weber Ernst Juerg, 2010. "The Role of the Real Interest Rate in U.S. Macroeconomic History," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-26, April.
    2. Ulrich Camen, 2006. "Monetary policy in Vietnam: the case of a transition country," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in Asia: approaches and implementation, volume 31, pages 232-252, Bank for International Settlements.
    3. W. R. Garside, 2012. "Japan’s Great Stagnation," Books, Edward Elgar Publishing, number 14624, March.

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    More about this item

    Keywords

    Preconceived ideas; perception on economic mechanism; vested interests; great depression; deflation in contemporary Japan;
    All these keywords.

    JEL classification:

    • B2 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • N2 - Economic History - - Financial Markets and Institutions

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