Japan's Deflation, Problems in the Financial System and Monetary Policy

Baba, Naohiko; Nishioka, Shinichi; Oda, Nobuyuki; Shirakawa, Masaaki; Ueda, Kazuo; Ugai, Hiroshi

doi:10.2139/ssrn.861664

Cited by 53 publications

(51 citation statements)

References 22 publications

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“…It seems to be a case of "bad" deflation characterized by stagnant real activity along with mild deflation (Ahearne et al (2002)). Arguably, the underlying cause of the Japanese problem was not deflation, per se, but the problems in the banking system with its concomitant adverse consequences for the monetary transmission mechanism (Hetzel (2004), Sellon (2004), Baba et al (2004)). 41 The continued weakness of the Japanese banking system, ie the inability to close or recapitalize insolvent banks, may have hampered the Bank of Japan's ability to stimulate bank lending.…”

Section: Box 1 Recent Deflation Experiencesmentioning

confidence: 99%

Deflation and Monetary Policy in a Historical Perspective: Remembering the Past or Being Condemned to Repeat It?

Bordo

Filardo

2004

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What does the historical record tell us about how to conduct monetary policy in a deflationary environment? We present a broad cross-country historical study of deflation over the past two centuries in order to shed light on current policy challenges. We first review the theoretical literature on deflation. We then characterize deflation by distinguishing among the "good, the bad and the ugly" ones -considering both empirical determinants and historical narratives of each type. Emphasis is put on the linkages between the current inflation environment and that of the gold standard period.Particular attention is also put on what the historical record reveals about policies to escape undesirable deflation. In this regard we develop a policy typology based on the relative merits of interest rate and monetary instruments in combating different types of inflation/deflation behavior.

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Section: Box 1 Recent Deflation Experiencesmentioning

confidence: 99%

Deflation and Monetary Policy in a Historical Perspective: Remembering the Past or Being Condemned to Repeat It?

Bordo

Filardo

2004

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“…A pioneering work by Hayashi and Prescott (2002), based on a simple growth model, showed that movements of total factor productivity (hereafter TFP), which are regarded as exogenous changes in the technology level in their model, explains the bulk of output decline from the early 1990s onward. 2 Braun and Shioji (2007) obtained a similar result based a growth model in which two classes of technology, investment-speci…c technology and TFP, drive macroeconomic ‡uctuations in Japan. From the perspective of a New Keynesian framework, Sugo and Ueda (2008) estimate a model that is close to the model of Smets and Wouters (2005) using Japanese data and show that TFP shocks and investment adjustment cost shocks are the two important shocks that account for output ‡uctuations in Japan.…”

Section: Introductionmentioning

confidence: 77%

Japan's financial crises and lost decades

Hirakata

Sudo

Takei

et al. 2016

Japan and the World Economy

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In this paper we explore the role of financial intermediation malfunction in macroeconomic fluctuations in Japan. To this end we estimate, using Japanese data, a financial accelerator model in which the balance sheet conditions of entrepreneurs in a goods-producing sector and those of a financial intermediary affect macroeconomic activity. We find that shocks to the balance sheets of the two sectors have been quantitatively playing important role in macroeconomic fluctuations by affecting lending rates and aggregate investments. Their impacts are prominent in particular during financial crises. Shocks to the entrepreneurs balance sheets have played a key role in lowering investment in the bubble burst during the early 1990s and in the global financial crisis during the late 2000s. Shocks to the financial intermediaries balance sheets have persistently lowered investment throughout the 1990s. JEL codes: E31, E44, E52

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“…Baba et al (2005) and Oda and Ueda (2007) find that BoJ purchases had little effect on long-term yields. It is hard to distinguish the partial effect of central bank bond purchases from the powerful effect of the central bank's commitment essentially to keep the overnight rate at zero until the return of inflation (the so-called policy duration effect).…”

Section: Japanese Debt Management Since 2000 and Boj Jgb Purchasesmentioning

confidence: 98%

Taxation and the Financial Crisis

Alworth¹,

Arachi²

2012

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BookTaxation and the Financial Crisis Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte.

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Japan's Deflation, Problems in the Financial System and Monetary Policy

Cited by 53 publications

References 22 publications

Deflation and Monetary Policy in a Historical Perspective: Remembering the Past or Being Condemned to Repeat It?

Deflation and Monetary Policy in a Historical Perspective: Remembering the Past or Being Condemned to Repeat It?

Japan's financial crises and lost decades

Taxation and the Financial Crisis

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