IDEAS home Printed from https://ideas.repec.org/p/esj/esridp/023.html
   My bibliography  Save this paper

Monetary Policy and the Liquidity Trap(in Japanese)

Author

Listed:
  • HORI Masahiro
  • TANABE Tomoyuki
  • YAMANE Makoto
  • AOKI Daiju

Abstract

In this paper, we tried to examine empirically the constraints to monetary policy posed by the zero-lower bound on nominal interest rates. To evaluate numerically the views expressed on policy effectiveness, we run several policy simulations, making full use of the two different versions of the ESRI Short-Run Macroeconometric Model, i.e. the backward-looking version and the forward-looking version. Though the monetary transmission mechanisms in the real world may be far more complicated than those depicted in the compact model, the authors believe that we could learn (or obtain a new understanding of) the following lessons from our model simulations.1) The effectiveness of monetary policy in Japan seems to have declined through the 1990s in its backward-looking settings, as suggested by the theory of the liquidity trap.2) However, with forward-looking agents, monetary policy still may be effective in fighting deflation. There are (at least) two distinct possible forward-looking responses to the permanent monetary expansions under zero interest rates, i.e. bull and bear equilibrium, depending on the people's knowledge or their belief in long-run monetary neutrality.

Suggested Citation

  • HORI Masahiro & TANABE Tomoyuki & YAMANE Makoto & AOKI Daiju, 2002. "Monetary Policy and the Liquidity Trap(in Japanese)," ESRI Discussion paper series 023, Economic and Social Research Institute (ESRI).
    • Handle: RePEc:esj:esridp:023
    as

    Download full text from publisher

    File URL: http://www.esri.go.jp/jp/archive/e_dis/e_dis023/e_dis023a.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Okina, Kunio, 1999. "Monetary Policy under Zero Inflation: A Response to Criticisms and Questions Regarding Monetary Policy," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 17(3), pages 157-182, December.
    2. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Singleton,John, 2010. "Central Banking in the Twentieth Century," Cambridge Books, Cambridge University Press, number 9780521899093, January.
    2. Adnan Haider Bukhari & Safdar Ullah Khan, 2008. "A Small Open Economy DSGE Model for Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 47(4), pages 963-1008.
    3. Yariv, Leeat & Jackson, Matthew O., 2018. "The Non-Existence of Representative Agents," CEPR Discussion Papers 13397, C.E.P.R. Discussion Papers.
    4. KAMKOUM, Arnaud Cedric, 2023. "The Federal Reserve’s Response to the Global Financial Crisis and its Effects: An Interrupted Time-Series Analysis of the Impact of its Quantitative Easing Programs," Thesis Commons d7pvg, Center for Open Science.
    5. Hendry, David F. & Clements, Michael P., 2003. "Economic forecasting: some lessons from recent research," Economic Modelling, Elsevier, vol. 20(2), pages 301-329, March.
    6. Vitek, Francis, 2006. "Measuring the Stance of Monetary Policy in a Small Open Economy: A Dynamic Stochastic General Equilibrium Approach," MPRA Paper 802, University Library of Munich, Germany.
    7. Zsolt Darvas, 2013. "Monetary transmission in three central European economies: evidence from time-varying coefficient vector autoregressions," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 40(2), pages 363-390, May.
    8. Luca Benati & Paolo Surico, 2009. "VAR Analysis and the Great Moderation," American Economic Review, American Economic Association, vol. 99(4), pages 1636-1652, September.
    9. Donald L. Kohn, 2008. "Lessons for central bankers from a Phillips curve framework," Conference Series ; [Proceedings], Federal Reserve Bank of Boston.
    10. Ftiti, Zied & Aguir, Abdelkader & Smida, Mounir, 2017. "Time-inconsistency and expansionary business cycle theories: What does matter for the central bank independence–inflation relationship?," Economic Modelling, Elsevier, vol. 67(C), pages 215-227.
    11. Christian Johnson & George G Kaufman, 2007. "Un banco, con cualquier otro nombre…," Boletín, CEMLA, vol. 0(4), pages 185-199, Octubre-d.
    12. Samir Ben Ali, 2013. "Estimating The New Keynesian Phillips Curve For Tunisia: Empirical Issues," Middle East Development Journal (MEDJ), World Scientific Publishing Co. Pte. Ltd., vol. 5(03), pages 1-17.
    13. Poterba, James M. & Summers, Lawrence H., 1983. "Dividend taxes, corporate investment, and `Q'," Journal of Public Economics, Elsevier, vol. 22(2), pages 135-167, November.
    14. repec:zbw:bofrdp:2007_032 is not listed on IDEAS
    15. Rother, Philipp C., 1998. "European monetary integration and the demand for money," Journal of International Money and Finance, Elsevier, vol. 17(4), pages 691-711, August.
    16. Sarah Mouabbi & Jean‐Guillaume Sahuc, 2019. "Evaluating the Macroeconomic Effects of the ECB's Unconventional Monetary Policies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 51(4), pages 831-858, June.
    17. He, Yong, 2018. "Can the visible and invisible hands coexist in land pricing?," MPRA Paper 88770, University Library of Munich, Germany.
    18. Hurtado, Samuel, 2014. "DSGE models and the Lucas critique," Economic Modelling, Elsevier, vol. 44(S1), pages 12-19.
    19. Janine Aron & John Muellbauer, 2006. "Housing Wealth, Credit Conditions and Consumption," CSAE Working Paper Series 2006-08, Centre for the Study of African Economies, University of Oxford.
    20. Matthew Plosser & João A. C. Santos, 2014. "Banks' incentives and the quality of internal risk models," Staff Reports 704, Federal Reserve Bank of New York.
    21. Lozej, Matija & Rannenberg, Ansgar, 2017. "The macroeconomic effects of the regulatory LTV and LTI ratios in the Central Bank of Ireland's DSGE model," Economic Letters 04/EL/17, Central Bank of Ireland.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:esj:esridp:023. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: HORI nobuko The email address of this maintainer does not seem to be valid anymore. Please ask HORI nobuko to update the entry or send us the correct address (email available below). General contact details of provider: https://edirc.repec.org/data/esrgvjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.