Krugman on the Liquidity Trap: Why Inflation Won't Bring Recovery in Japan

Jerome Levy Economics Institute Working Paper No. 298

8 Pages Posted: 11 Sep 2000

See all articles by Jan A. Kregel

Jan A. Kregel

Bard College - The Levy Economics Institute

Date Written: March 2000

Abstract

Paul Krugman has argued that Japan is in a liquidity trap and that it can recover only if the central bank there follows a policy of 'credible inflation.' This paper argues that Krugman's proposal, which is similar to what Fisher proposed during the Depression, is based on a different interpretation of the liquidity trap from that proposed by Keynes and as a result his policy recommendations can result in neither the elimination of the trap nor in Japan's economic recovery.

JEL Classification: E51, E52

Suggested Citation

Kregel, Jan A., Krugman on the Liquidity Trap: Why Inflation Won't Bring Recovery in Japan (March 2000). Jerome Levy Economics Institute Working Paper No. 298, Available at SSRN: https://ssrn.com/abstract=219494 or http://dx.doi.org/10.2139/ssrn.219494

Jan A. Kregel (Contact Author)

Bard College - The Levy Economics Institute ( email )

Blithewood
Annandale-on-Hudson, NY 12504
United States
845-758-7700 (Phone)
845-758-1149 (Fax)

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