2011 Fiscal Year Final Research Report
A New Explanation for Japan's Great Stagnation and Deflation
| Project/Area Number |
21530254
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| Research Category |
Grant-in-Aid for Scientific Research (C)
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| Allocation Type | Single-year Grants |
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| Section | 一般 |
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| Research Field |
Economic policy
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| Research Institution | National Graduate Institute for Policy Studies |
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Principal Investigator |
RHODES James r 政策研究大学院大学, 政策研究科, 教授 (70216240)
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| Project Period (FY) |
2009 – 2011
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| Keywords | Stagnation / Policy Impotence / Liquidity Sump / Liquidity Preference / Confidence / Black Swan Event |
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| Research Abstract |
In the liquidity sump theory of stagnation, extreme pessimism about an economy's growth potential results in a decline in asset prices and a nearly insatiable demand for liquidity. My research has shown that conventional money and expenditure multipliers become small and unstable in sump conditions. Furthermore, standard dynamic models(e. g. DSGE models) based on predictable structural and behavioral relationships have no predictive power in a liquidity sump. In such extreme conditions, conventional demand-management policies are ineffective. The focus of policy must be on restoring confidence through credible long-term policies that address the root cause(s) of generalized pessimism.
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Research Products
(12 results)
