Peril of the Inflation Exit Condition

24 Pages Posted: 5 Feb 2019

See all articles by Fumio Hayashi

Fumio Hayashi

National Graduate Institute for Policy Studies; Harvard University - Department of Economics

Date Written: March 2019

Abstract

Recent empirical evidence on monetary policy in Japan suggests that exits from the zero‐interest‐rate policy triggered by policy shocks can be expansionary. This paper provides theoretical examples of such expansionary policy‐induced exits. The examples suggest that the exit condition (the Bank of Japan’s stated commitment of not exiting from the zero‐rate regime unless the inflation rate rises above a certain threshold) may have made it difficult for the economy to escape from the liquidity trap.

Suggested Citation

Hayashi, Fumio, Peril of the Inflation Exit Condition (March 2019). The Japanese Economic Review, Vol. 70, Issue 1, pp. 4-27, 2019. Available at SSRN: https://ssrn.com/abstract=3328857 or http://dx.doi.org/10.1111/jere.12218

Fumio Hayashi (Contact Author)

National Graduate Institute for Policy Studies ( email )

Roppongi 7-22-1
Minato-ku
Tokyo, 106-0032
Japan

HOME PAGE: http://https://sites.google.com/site/fumiohayashi/home

Harvard University - Department of Economics

Littauer Center
Cambridge, MA 02138
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
1
Abstract Views
7
PlumX Metrics