Japanese Monetary Policy and Deflation

FRB Richmond Economic Quarterly, Vol. 89, No. 3, Summer 2003, pp. 21-52

32 Pages Posted: 5 Dec 2012

See all articles by Robert L. Hetzel

Robert L. Hetzel

Federal Reserve Banks - Federal Reserve Bank of Richmond

Date Written: 2003

Abstract

The price level is falling in Japan. To end deflation, the Bank of Japan should move to a strategy of actively creating bank reserves and money in response to price level deviations from an explicit target. Under the current policy, bank reserves are demand-determined rather than supply-determined. Current procedures limit reserves creation to the amount demanded at a zero short-term interest rate.

Suggested Citation

Hetzel, Robert L., Japanese Monetary Policy and Deflation (2003). FRB Richmond Economic Quarterly, Vol. 89, No. 3, Summer 2003, pp. 21-52, Available at SSRN: https://ssrn.com/abstract=2184913

Robert L. Hetzel (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

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