Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/72634
Authors: 
Coenen, Guenter
Wieland, Volker
Year of Publication: 
2003
Series/Report no.: 
CFS Working Paper 2003/09
Abstract: 
In this paper we study the role of the exchange rate in conducting monetary policy in an economy with near-zero nominal interest rates as experienced in Japan since the mid-1990s. Our analysis is based on an estimated model of Japan, the United States and the euro area with rational expectations and nominal rigidities. First, we provide a quantitative analysis of the impact of the zero bound on the effectiveness of interest rate policy in Japan in terms of stabilizing output and inflation. Then we evaluate three concrete proposals that focus on depreciation of the currency as a way to ameliorate the effect of the zero bound and evade a potential liquidity trap. Finally, we investigate the international consequences of these proposals.
Subjects: 
monetary policy rules
zero interest rate bound
liquidity trap
rational expectations
nominal rigidities
exchange rates
monetary transmission.
JEL: 
E31
E52
E58
E61
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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