Imes Discussion Paper Series Institute for Monetary and Economic Studies Bank of Japan
نویسنده
چکیده
The paper examines the transmission mechanism of monetary policy in an open economy with and without a binding zero bound on nominal interest rates. In particular, a foolproof way of escaping from a liquidity trap is suggested, consisting of a price-level target path, a devaluation of the currency and a temporary exchange rate peg, which is later abandoned in favor of price-level or in‡ation targeting when the price-level target has been reached. This will jump-start the economy and escape de‡ation by a real depreciation of the domestic currency, a lower long real interest rate, and increased in‡ation expectations. The abandonment of the exchange-rate peg and the shift to price-level or in‡ation targeting will avoid the risk of overheating. Some conclusions for Japan are included. JEL Classi...cation: E52, F31, F33, F41
منابع مشابه
Imes Discussion Paper Series Institute for Monetary and Economic Studies Bank of Japan
This paper summarizes the analysis and findings of the Boskin Commission, reviews criticisms, provides responses to criticisms, summarizes recent changes in the CPI and recent research on price measurement.
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