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Trend Inflation and Monetary Policy Regimes in Japan

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  • OKIMOTO Tatsuyoshi

Abstract

This paper examines the dynamics of trend inflation in Japan over the last three decades based on the smooth transition Phillips curve model. We find that there is a strong connection between the trend inflation and monetary policy regimes. The results also suggest that the introduction of the inflation targeting policy and quantitative and qualitative easing in the beginning of 2013 successfully escaped from the deflationary regime, but were not enough to achieve the 2% inflation target. Finally, our results indicate the significance of exchange rates in explaining the recent fluctuations of inflation and the importance of oil and stock prices in maintaining the positive trend inflation regime.

Suggested Citation

  • OKIMOTO Tatsuyoshi, 2018. "Trend Inflation and Monetary Policy Regimes in Japan," Discussion papers 18024, Research Institute of Economy, Trade and Industry (RIETI).
  • Handle: RePEc:eti:dpaper:18024
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    References listed on IDEAS

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    Cited by:

    1. López-Villavicencio, Antonia & Pourroy, Marc, 2019. "Does inflation targeting always matter for the ERPT? A robust approach," Journal of Macroeconomics, Elsevier, vol. 60(C), pages 360-377.

    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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