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Taming Japan's DeflationThe Debate over Unconventional Monetary Policy$
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Gene Park, Saori N. Katada, Giacomo Chiozza, and Yoshiko Kojo

Print publication date: 2018

Print ISBN-13: 9781501728174

Published to Cornell Scholarship Online: May 2019

DOI: 10.7591/cornell/9781501728174.001.0001

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Ideas and Monetary Policy

Ideas and Monetary Policy

A Quantitative Test

Chapter:
(p.112) Chapter 6 Ideas and Monetary Policy
Source:
Taming Japan's Deflation
Author(s):

Gene Park

Saori N. Katada

Giacomo Chiozza

Yoshiko Kojo

Publisher:
Cornell University Press
DOI:10.7591/cornell/9781501728174.003.0006

This chapter assesses central bankers' attitudes toward inflation and deflation. Specifically, it presents a statistical test to demonstrate whether, and to what extent, the ideas held by the central bankers at the Bank of Japan (BOJ) influenced Japan's monetary policy. The results show a systematic effect of central bankers' ideas on how they determine what should be Japan's monetary base, while controlling for the status of the economy and the political environment. Concerns about inflation are a better predictor of policy than objective economic indicators. The results also reveal an Abe effect, a systematic impact of the policy ideas championed by Prime Minister Abe Shinzō after he came to power in 2012. Meanwhile, there is little evidence that the political business cycle or political partisanship influenced the BOJ policy choices.

Keywords:   central bankers, Bank of Japan, monetary policy, monetary base, inflation, Abe effect, policy ideas, Abe Shinzō, political partisanship, BOJ policy choices

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