Cover Page; Title Page; Copyright Page; Contents; I. Introduction; 1. The Japanese Economy Since 1990; II. Empirical Analysis; A. Model Specification; B. Model Estimation; 1. Estimation Results; 2. Estimation Results: Implicit Inflation Target; 3. Estimation Results: Natural Rate of Interest; 4. Estimated Policy-Rate Target and Actual Policy Rate; 5. Autocorrelation Functions; III. Counterfactual Analysis; 6. Demand and Supply Shocks: 1990-2005; 7. Actual and Counterfactual Macroeconomic Dynamics:; 2. Actual and Counterfactual Inflation and Output Loss
8. Actual and Counterfactual Macroeconomic Dynamics:9. Actual and Counterfactual Macroeconomic Dynamics:; 10. Actual and Counterfactual Macroeconomic Dynamics:; IV. Conclusion; Appendix; References; Footnotes
Summary
This paper investigates how monetary policy can help ward off a protracted deflationary slump when policy rates are near the zero bound by studying the experience of Japan during the ""Lost Decade"" which followed the asset-price bubble collapse in the early 1990s. Estimation results based on a structural model suggest that the Bank of Japan's interest-rate policy fits a conventional forward-looking reaction function with an inflation target of about 1 percent. The disappointing economic performance thus seems primarily due to a series of adverse economic shocks rather than an extraordinary po
