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Price stability and Japanese monetary policy

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  • Robert L. Hetzel

Abstract

For most of the time since 1995, the Japanese price level has declined. Since early 1999, short-term interest rates have mostly remained near zero. Also, starting in 2001, the excess reserves held by banks have risen dramatically. Many observers have concluded that central banks are powerless to end deflation when short-term interest rates are near zero. This paper argues that such a pessimistic conclusion is unwarranted.

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  • Robert L. Hetzel, 2004. "Price stability and Japanese monetary policy," Working Paper 04-01, Federal Reserve Bank of Richmond.
    • Handle: RePEc:fip:fedrwp:04-01
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    References listed on IDEAS

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    1. Gauti B. Eggertsson & Michael Woodford, 2003. "Optimal Monetary Policy in a Liquidity Trap," NBER Working Papers 9968, National Bureau of Economic Research, Inc.
    2. Saito, Makoto & Shiratsuka, Shigenori, 2001. "Financial Crises As the Failure of Arbitrage: Implications for Monetary Policy," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 19(S1), pages 239-270, February.
    3. Okina, Kunio & Shiratsuka, Shigenori, 2004. "Policy commitment and expectation formation: Japan's experience under zero interest rates," The North American Journal of Economics and Finance, Elsevier, vol. 15(1), pages 75-100, March.
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    Cited by:

    1. Claudio Morana, 2005. "The Japanese deflation: has it had real effects? Could it have been avoided?," Applied Economics, Taylor & Francis Journals, vol. 37(12), pages 1337-1352.
    2. Assenmacher-Wesche, Katrin & Gerlach, Stefan & Sekine, Toshitaka, 2008. "Monetary factors and inflation in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 22(3), pages 343-363, September.
    3. Aviral Kumar Tiwari & Olaolu Richard Olayeni & Reza Sherafatian-Jahromi & Olofin Sodik Adejonwo, 2019. "Output Gap, Money Growth and Interest Rate in Japan: Evidence from Wavelet Analysis," Arthaniti: Journal of Economic Theory and Practice, , vol. 18(2), pages 171-184, December.
    4. Woon Gyu Choi & David Cook, 2006. "Stock Market Liquidity and the Macroeconomy: Evidence from Japan," NBER Chapters, in: Monetary Policy with Very Low Inflation in the Pacific Rim, pages 309-335, National Bureau of Economic Research, Inc.
    5. Schenkelberg, Heike & Watzka, Sebastian, 2013. "Real effects of quantitative easing at the zero lower bound: Structural VAR-based evidence from Japan," Journal of International Money and Finance, Elsevier, vol. 33(C), pages 327-357.
    6. Hanisch, Max, 2017. "The effectiveness of conventional and unconventional monetary policy: Evidence from a structural dynamic factor model for Japan," Journal of International Money and Finance, Elsevier, vol. 70(C), pages 110-134.

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    Keywords

    Monetary policy;

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