A Myth of "the Keynesian before Keynes:" Low Interest Rate Policy in the Early 1930s in Japan

Masato Shizume

No 191, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: Departing from the gold standard was the necessary condition for early recovery from the Great Depression in 1930s (Eichengreen and Sachs[1985]). Then, was it the sufficient condition for an independent monetary policy? I explore Japan's monetary policy during the interwar period, focusing on the macroeconomic policy innovation in the early 1930s. I explore the view of the Japanese policymakers at that time, making use of newly available archives from the Bank of Japan. I derive a new series of representative long-term interest rate data from the market price of one particular government bond. Then, I explore the relationship between long-term interest rates of Japan and the two financial centers, Great Britain and the United States. The Japanese experience shows how strong the Golden Fetters were during the post-gold-standard era. The institution of the gold standard had an enduring influence on Japanese policymakers, even after its constraints were no longer formally binding.

JEL-codes: E42 N15 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2006-06
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Persistent link: https://EconPapers.repec.org/RePEc:kob:dpaper:191

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