EconPapers    
Economics at your fingertips  
 

Raising an inflation target: The Japanese experience with Abenomics

Andrea De Michelis and Matteo Iacoviello ()

European Economic Review, 2016, vol. 88, issue C, 67-87

Abstract: This paper draws from Japan׳s recent monetary experiment to examine the effects of an increase in the inflation target during a liquidity trap. We review Japanese data and examine through a VAR model how macroeconomic variables respond to an identified inflation target shock. We apply these findings to calibrate the effect of a shock to the inflation target in a new-Keynesian DSGE model of the Japanese economy. We argue that imperfect observability of the inflation target and a separate exchange rate shock are needed to successfully account for the behavior of nominal and real variables in Japan since late 2012. Our analysis indicates that Japan has made some progress towards overcoming deflation, but further measures are needed to raise inflation to 2 percent in a stable manner.

Keywords: Credibility; Deflation; Inflation target; Japan; Monetary policy (search for similar items in EconPapers)
JEL-codes: E31 E32 E47 E52 E58 F31 F41 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0014292116300411
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Raising an Inflation Target: The Japanese Experience with Abenomics (2016) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:88:y:2016:i:c:p:67-87

Access Statistics for this article

European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

More articles in European Economic Review from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-04-22
Handle: RePEc:eee:eecrev:v:88:y:2016:i:c:p:67-87