Optimal inflation for Japan's economy

Hitoshi Fuchi, Nobuyuki Oda and Hiroshi Ugai

Journal of the Japanese and International Economies, 2008, vol. 22, issue 4, 439-475

Abstract: This paper quantitatively evaluates a steady-state inflation rate that is considered optimal from the perspective of social welfare, using a model describing the Japanese economy. Specifically, we build a DSGE model capable of evaluating the effects, on social welfare, of points concerning the costs and benefits that accompany inflation: the opportunity cost of holding money, the zero lower bound on nominal interest rates, price stickiness and the downward wage rigidity. Building on this, we conduct stochastic simulations that calculate the social loss with different steady-state inflation rates, and investigate the optimal inflation rate. We also analyze the range of the optimal inflation rate when we change the model settings. J. Japanese Int. Economies 22 (4) (2008) 439-475.

Keywords: Inflation; Social; loss; Monetary; policy; Zero; lower; bound; on; nominal; interest; rates; Downward; wage; rigidity; Price; stickiness (search for similar items in EconPapers)
Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0889-1583(08)00047-6
Full text for ScienceDirect subscribers only

Related works:
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:jjieco:v:22:y:2008:i:4:p:439-475

Access Statistics for this article

Journal of the Japanese and International Economies is currently edited by Takeo Hoshi

More articles in Journal of the Japanese and International Economies from Elsevier
Bibliographic data for series maintained by Catherine Liu ().