... Nelson, Maurice Obstfeld, Vincent Reinhart, and two reviewers for helpful comments. This chapter deals with developing a monetary policy rule which helps the authorities to avoid deflation altogether. It specifically describes the development and exploration of a monetary-policy rule that is appropriate...

... of Economic Research. This chapter reports a long comprehensive survey of Japanese monetary policy over the last two decades: the period of bubble and burst (1985–1997) and the issue under the new law of the Bank of Japan (BOJ) (1998-). It explores the monetary policy actions to prevent deflation. Given...

... to be explicit about how precisely they can control inflation. However, there are bounds, set by fiscal policy broadly conceived, on the central bank's control over inflation. It may lose control of a deflation. As a theoretical possibility, the lack of a credible fiscal policy may open the door to equilibria...

...Extremely low inflation rates have moved to the forefront of monetary policy discussions. In Asia, a number of countries—most prominently Japan, but also Taiwan and China—have actually experienced deflation over the last fifteen years. This book explores the factors that have contributed...

... product through March 2002). The chapter highlights two key problems that underlie the banks' inability to make profits. The first is deflation, which limits their ability to raise interest rates without crippling their borrowers. The second problem is the operations of government-subsidized financial...

... of the Japanese deflation. It evaluates the long-run Phillips curve equation using the gross domestic product (GDP) deflator and the estimated GDP gap. The estimated GDP gap figures and the Phillips curve show that the widening GDP gap resulted in the acceleration of deflation from 1995 to 2003. This indicates...

..., University of California-Berkeley, director of its Clausen Center for International Business and Policy, and a research associate of the National Bureau of Economic Research. Japan is perhaps the most prominent among Asian countries that have experienced deflation in the last fifteen years. Mainland China...

... for financial assistance (Project No. HKUST6291/03H) and Hao Li for valuable research work. This chapter is concerned with the association between the liquidity of the Japanese stock market and the macroeconomy in a period of prolonged deflation, slow growth, and near-zero interest rates. During the 1990s...

... in the paper are the authors' responsibility. The early version of this paper has been published as NBER Working Paper No. 11244, March 2005. This chapter discusses the deflation experience in Taiwan, and how monetary policy was conducted to mitigate the problem. Political unrest, tensions with China, out...