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

 
Author/Editor: Hunt, Ben ; Laxton, Douglas
 
Publication Date: November 01, 2001
 
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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(s): Interest rates | Japan | Monetary policy | Economic models

Author's Keyword(s): Monetary policy rules | liquidity trap | potential output | uncertainity
 
English
Publication Date: November 01, 2001
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA1862001 Pages: 37
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