On December 12, 2019, Fed in Print will introduce its new platform for discovering content. Please direct your questions to Anna Oates

Home About Latest Browse RSS Advanced Search

Board of Governors of the Federal Reserve System (U.S.)
International Finance Discussion Papers
Raising an Inflation Target : The Japanese Experience with Abenomics
Andrea De Michelis
Matteo Iacoviello
Abstract

This paper draws from Japan’s recent monetary experiment to examine the effects of an increase in the inflation target during a liquidity trap. We review Japanese data and examine through a VAR model how macroeconomic variables respond to an identified inflation target shock. We apply these findings to calibrate the effect of a shock to the inflation target in a new-Keynesian DSGE model of the Japanese economy. We argue that imperfect observability of the inflation target and a separate exchange rate shock are needed to successfully account for the behavior of nominal and real variables in Japan since late 2012. Our analysis indicates that Japan has made some progress towards overcoming deflation, but further measures are needed to raise inflation to 2 percent in a stable manner.


Download Full text
Cite this item
Andrea De Michelis & Matteo Iacoviello, Raising an Inflation Target : The Japanese Experience with Abenomics, Board of Governors of the Federal Reserve System (U.S.), International Finance Discussion Papers 1168, May 2016.
More from this series
JEL Classification:
Subject headings:
Keywords: Abenomics ; Credibility ; Deflation ; Inflation target ; Japan ; Monetary policy
DOI: 10.17016/IFDP.2016.1168
For corrections, contact Ryan Wolfslayer ()
Fed-in-Print is the central catalog of publications within the Federal Reserve System. It is managed and hosted by the Economic Research Division, Federal Reserve Bank of St. Louis.

Privacy Legal