Date of Original Version

Winter 2003

Type

Article

Rights Management

Used with permission: http://license.icopyright.net/creator/use.act?n=federalreservebankofrichmond-1179

Abstract or Description

Analysis suggests that Bank of Japan (BOJ) policy has been insufficiently expansionary for over a decade; that the BOJ has faced special problems because of the zero lower bound on interest rates; and that the most promising approach would entail rapid base money growth effected primarily by purchases of foreign exchange. Simulation analysis with a calibrated optimizing model indicates that such a policy would probably increase Japan's net imports. The BOJ Law presents some difficulties, but these should be surmountable.

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Published In

Federal Reserve Bank of Richmond Economic Quarterly, 89, 1.