MONETARY POLICY DURING JAPAN'S LOST DECADE*

R. Braun and Yuichiro Waki

The Japanese Economic Review, 2006, vol. 57, issue 2, 324-344

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% during the 1990s avoids the zero bound and enhances welfare.

Date: 2006
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Citations: View citations in EconPapers (42)

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https://doi.org/10.1111/j.1468-5876.2006.00371.x

Related works:
Working Paper: Monetary Policy during Japan's Lost Decade (2005)
Working Paper: Monetary Policy during Japan's Lost Decade (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jecrev:v:57:y:2006:i:2:p:324-344

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