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Krugman on the Liquidity Trap: Why Inflation Won't Bring Recovery in Japan

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  • Jan A. Kregel

    (Jerome Levy Econ Inst & Univ of Bologna)

Abstract

Paul Krugman has argued that Japan is in a liquidity trap and that it can recover only if the central bank there follows a policy of "credible inflation." This paper argues that Krugman's proposal, which is similar to what Fisher proposed during the Depression, is based on a different interpretation of the liquidity trap from that proposed by Keynes and as a result his policy recommendations can result in neither the elimination of the trap nor in Japan's economic recovery.

Suggested Citation

  • Jan A. Kregel, 2000. "Krugman on the Liquidity Trap: Why Inflation Won't Bring Recovery in Japan," Macroeconomics 0004045, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:0004045
    Note: Type of Document - Adobe Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 19; figures: included
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/0004/0004045.pdf
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Nominal Prices and Output Gaps
      by rsj in windyanabasis on 2011-06-08 09:20:02

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    Cited by:

    1. Jorg Bibow, 2004. "Fiscal Consolidation: Contrasting Strategies & Lessons From International Experiences," Economics Working Paper Archive wp_400, Levy Economics Institute.
    2. Mauro Boianovsky, 2004. "The IS-LM Model and the Liquidity Trap Concept: From Hicks to Krugman," History of Political Economy, Duke University Press, vol. 36(5), pages 92-126, Supplemen.
    3. Peter Spahn, 2007. "Real Interest Rates, Intertemporal Prices and Macroeconomic Stabilization A Journey Through the History of Economic Thought," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 292/2007, Department of Economics, University of Hohenheim, Germany.

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    JEL classification:

    • E - Macroeconomics and Monetary Economics

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