Comments on "Price Stability and Japanese Monetary Policy" (1)Hiroshi Fujiki, Kunio Okina, and Shigenori Shiratsuka This commentary summarizes the authors'main points of agreement and disagreement with respect to the proposal written by Dr. Hetzel. The authors agree with Dr. Hetzel's proposal on four points: after a central bank has lowered the interest rate to zero, (1) a central bank is not in fact powerless to stop deflation; (2) it does not make sense to focus on the quantity of the monetary base per se; (3) it is important to influence market expectations if monetary policy is to be effective; and (4) central bank solvency holds some importance. The authors disagree with Dr. Hetzel's proposal on three points: (1) transmission channels of quantitative easing; (2) potential costs and benefits of his proposal; and (3) the timing of introduction of an explicit nominal anchor. Key words: Quantitative easing; Deflation Views expressed in Monetary and Economic Studies are those
of the authors and do not necessarily reflect those of the Bank
of Japan or Institute for Monetary and Economic Studies. |
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