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Author:Teranishi, Yuki 

Working Paper
Global liquidity trap
In this paper we consider a two-country New Open Economy Macroeconomics model, and analyze the optimal monetary policy when countries cooperate in the face of a "global liquidity trap"--i.e., a situation where the two countries are simultaneously caught in liquidity traps. The notable features of the optimal policy in the face of a global liquidity trap are history dependence and international dependence. The optimality of history dependent policy is confirmed as in local liquidity trap. A new feature of monetary policy in global liquidity trap is whether or not a country's nominal interest rate is hitting the zero bound affects the target inflation rate of the other country. The direction of the effect depends on whether goods produced in the two countries are Edgeworth complements or substitutes. We also compare several classes of simple interest-rate rules. Our finding is that targeting the price level yields higher welfare than targeting the inflation rate, and that it is desirable to let the policy rate of each country respond not only to its own price level and output gap, but also to those in the other country.
AUTHORS: Sudo, Nao; Nakajima, Tomoyuki; Fujiwara, Ippei; Teranishi, Yuki
DATE: 2010

Working Paper
Financal frictions and policy cooperation: a case with monopolistic banking and staggered loan contracts
Do financial frictions call for policy cooperation? This paper investigates the implications of simple financial frictions, monopolistic banking together with staggered loan contracts, for monetary policy in open economies in the linear quadratic (LQ) framework. Welfare analysis shows that policy cooperation improves social welfare in the presence of such financial frictions. There also exist long-run gains from cooperation in addition to these by jointly stabilizing inefficient fluctuations over the business cycle, that are usually found in models with price rigidities. The Ramsey optimal steady states differ between cooperation and noncooperation. Such gains from cooperation arise irrespective of the existence of international lending or borrowing.
AUTHORS: Teranishi, Yuki; Fujiwara, Ippei
DATE: 2015-04-01

Working Paper
Real exchange rate dynamics revisited: a case with financial market imperfections
In this paper, we investigate the relationship between real exchange rate dynamics and financial market imperfections. For this purpose, we first construct a New Open Economy Macroeconomics (NOEM) model that incorporates staggered loan contracts as a simple form of the financial market imperfections. Our model with such a financial market friction replicates persistent, volatile, and realistic hump-shaped responses of real exchange rates, which have been thought very difficult to materialize in standard NOEM models. Remarkably, these realistic responses can materialize even with both supply and demand shocks, such as cost-push, loan rate and monetary policy shocks. This implies that the financial market developments is a key element for understanding real exchange rate dynamics.
AUTHORS: Fujiwara, Ippei; Teranishi, Yuki
DATE: 2010

Conference Paper
Monetary policy in a life-cycle economy
AUTHORS: Fujiwara, Ippei; Teranishi, Yuki
DATE: 2005

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