Monetary Policy during Japan's Lost Decade

R. Braun and Yuichiro Waki

No CIRJE-F-343, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: We develop a quantitative costly price adjustment model with capital formation for the Japanese Economy. The model respects the zero interest rate bound and is calibrated to reproduce the nominal and real facts from the 1990s. We use the model to investigate the properties of alternative monetary policies during this period. The setting of the long-run nominal interest rate in a Taylor rule is much more important for avoiding the zero bound than the setting of the reaction coefficients. A long-run interest rate target of 2.3 percent during the 1990s avoids the zero bound and enhances welfare.

Pages: 42 pages
Date: 2005-05
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-sea
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Citations: View citations in EconPapers (1)

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http://www.cirje.e.u-tokyo.ac.jp/research/dp/2005/2005cf343.pdf (application/pdf)

Related works:
Journal Article: MONETARY POLICY DURING JAPAN'S LOST DECADE* (2006)
Working Paper: Monetary Policy during Japan's Lost Decade (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2005cf343

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