The Zero Interest Rate Floor (ZIF) and its Implications for Monetary Policy in Japan

Author/Editor:

Douglas Laxton ; Benjamin L Hunt

Publication Date:

November 1, 2001

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper uses the IMF's macroeconomic model MULTIMOD to examine the implications of the zero-interest-rate floor (ZIF) for the design of monetary policy in Japan. Similar to findings in other studies, targeting rates of inflation lower than 2.0 percent significantly increases the likelihood of the ZIF becoming binding. Systematic monetary policy strategies that respond strongly to stabilize output and inflation, or that incorporate some explicit price-level component, can help to mitigate the implications of the ZIF.

Series:

Working Paper No. 01/186

Subject:

English

Publication Date:

November 1, 2001

ISBN/ISSN:

9781451859461/1018-5941

Stock No:

WPIEA1862001

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

37

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