 International deflation risks under alternative macroeconomic policiesKevin Clinton, Roberto Garcia-Saltos (), Marianne Johnson, Ondra Kamenik and Douglas Laxton Journal of the Japanese and International Economies, 2010, vol. 24, issue 2, 140-177 Abstract: We use a version of the Global Projection Model covering the United States, Euro area and Japan to assess options for dealing with the looming risk of international deflation. The zero floor to interest rates constrains monetary policy. Confidence intervals, derived from stochastic simulations, indicate ranges of uncertainty. The results suggest a high probability of a declining price level for a couple of quarters in 2009. Suitable policy adaptations reduce the risk that this might turn into a prolonged, global deflation. These include: a price level path target for monetary policy, which would respond to previous, as well as expected, shortfalls from the desired inflation rate; a more stimulative fiscal policy; and an increase in the long-run target for inflation. Keywords: Monetary; policy; Price; level; path; targeting; Deflation; Fiscal; policy; Fiscal; multiplier (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jjieco:v:24:y:2010:i:2:p:140-177 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 |
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