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Reflating Japan; Time to Get Unconventional?

Author

Listed:
  • Elif C Arbatli
  • Dennis P Botman
  • Kevin Clinton
  • Pietro Cova
  • Vitor Gaspar
  • Zoltan Jakab
  • Douglas Laxton
  • Constant A Lonkeng Ngouana
  • Joannes Mongardini
  • Hou Wang

Abstract

Japan has ambitious economic goals: 3 percent nominal growth; 2 percent inflation; and a primary budget surplus. Abenomics has employed the three arrows of monetary, fiscal and structural policies, but the goals remain out of reach. We propose that countercyclical measures be embedded in long-run frameworks that anchor expectations for inflation and public debt. In addition, we argue for an incomes policy to assist reflation. Model simulations suggest that, combined, these proposals would make headway towards the goals, with, on balance, a better chance of success than the more unconventional policy alternatives proposed by Krugman, Svensson, and Turner from a risk-return perspective.

Suggested Citation

  • Elif C Arbatli & Dennis P Botman & Kevin Clinton & Pietro Cova & Vitor Gaspar & Zoltan Jakab & Douglas Laxton & Constant A Lonkeng Ngouana & Joannes Mongardini & Hou Wang, 2016. "Reflating Japan; Time to Get Unconventional?," IMF Working Papers 16/157, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:16/157
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    References listed on IDEAS

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    1. Ali Alichi & Jaromir Benes & Joshua Felman & Irene Feng & Charles Freedman & Douglas Laxton & Evan C Tanner & David Vavra & Hou Wang, 2015. "Frontiers of Monetary Policymaking; Adding the Exchange Rate as a Tool to Combat Deflationary Risks in the Czech Republic," IMF Working Papers 15/74, International Monetary Fund.
    2. Ricardo J. Caballero & Takeo Hoshi & Anil K. Kashyap, 2008. "Zombie Lending and Depressed Restructuring in Japan," American Economic Review, American Economic Association, vol. 98(5), pages 1943-1977, December.
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    4. Kevin Clinton & Charles Freedman & Michel Juillard & Ondrej Kamenik & Douglas Laxton & Hou Wang, 2015. "Inflation-Forecast Targeting; Applying the Principle of Transparency," IMF Working Papers 15/132, International Monetary Fund.
    5. Giovanni Ganelli & Naoko Miake, 2015. "Foreign Help Wanted; Easing Japan’s Labor Shortages," IMF Working Papers 15/181, International Monetary Fund.
    6. Buiter, Willem H., 2014. "The simple analytics of helicopter money: Why it works - always," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 8, pages 1-51.
    7. Jérémie Cohen‐Setton & Joshua K. Hausman & Johannes F. Wieland, 2017. "Supply‐Side Policies in the Depression: Evidence from France," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 49(2-3), pages 273-317, March.
    8. Romer, Christina D., 1999. "Why Did Prices Rise in the 1930s?," The Journal of Economic History, Cambridge University Press, vol. 59(01), pages 167-199, March.
    9. Michal Andrle & Patrick Blagrave & Pedro Espaillat & Keiko Honjo & Benjamin L Hunt & Mika Kortelainen & René Lalonde & Douglas Laxton & Eleonara Mavroeidi & Dirk V Muir & Susanna Mursula & Stephen Snu, 2015. "The Flexible System of Global Models – FSGM," IMF Working Papers 15/64, International Monetary Fund.
    10. Chie Aoyagi & Giovanni Ganelli, 2013. "The Path to Higher Growth; Does Revamping Japan’s Dual Labor Market Matter?," IMF Working Papers 13/202, International Monetary Fund.
    11. Ali Alichi & Kevin Clinton & Charles Freedman & Ondra Kamenik & Michel Juillard & Douglas Laxton & Jarkko Turunen & Hou Wang, 2015. "Avoiding Dark Corners; A Robust Monetary Policy Framework for the United States," IMF Working Papers 15/134, International Monetary Fund.
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    Citations

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    Cited by:

    1. Mariana Colacelli & Emilio Fernández Corugedo, 2018. "Macroeconomic Effects of Japan’s Demographics: Can Structural Reforms Reverse Them?," IMF Working Papers 18/248, International Monetary Fund.
    2. GOTO Yasuo & Scott WILBUR, 2017. "Efficiency among Japanese SMEs: In the context of the zombie firm hypothesis and firm size," Discussion papers 17123, Research Institute of Economy, Trade and Industry (RIETI).
    3. repec:eee:japwor:v:49:y:2019:i:c:p:105-112 is not listed on IDEAS
    4. Vitor Gaspar & Maurice Obstfeld & Ratna Sahay & Douglas Laxton & Dennis P Botman & Kevin Clinton & Romain A Duval & Kotaro Ishi & Zoltan Jakab & Laura Jaramillo & Constant A Lonkeng Ngouana & Tommaso , 2016. "Macroeconomic Management When Policy Space is Constrained; A Comprehensive, Consistent and Coordinated Approach to Economic Policy," IMF Staff Discussion Notes 16/09, International Monetary Fund.

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