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Tax Incentives for Investment: Evidence from Japan's High-Growth Era

Tax devices have occasionally been adopted as policy tools to promote economic growth in major industrialized countries after the Second World War. In Japan, various accelerated depreciation schemes under the name 'special depreciation' were employed as major devices to stimulate investments. In this paper, we manually collect firm-level data series...

The Effects of Asset Purchases and Normalization of US Monetary Policy

This paper examines changes in the effects of unconventional monetary policies in the US. To this end, we estimate a Markov-switching VAR model with absorbing regimes to capture possible structural changes. Our results detect regime changes around the beginning of 2011 and the middle of 2013. Before 2011, the US large-scale asset purchases (LSAPs) had...

Imperfect Information, Shock Heterogeneity, and Inflation Dynamics

We establish important empirical regularities on firms' expectations about aggregate and idiosyncratic components of sectoral demand using industry-level survey data for the universe of Japanese firms. Expectations about the idiosyncratic component of demand differ across sectors, and they positively co-move with those about aggregate component. To...

The Euro Area Economic, Fiscal and Financial Governance: Difficulties and Successes in the Past – Present Challenges – Future Steps

Central Bank Design under a Continued Low Inflation and Interest Rate Environment Summary of the 2019 BOJ-IMES Conference

Alternatives to In‡flation Targeting in Low Interest Rate Environments

The challenges of a low interest rate, low inflation environment have led to calls to re-examine the basic framework of flexible inflation targeting (IT). Interest in alternatives such as price-level targeting (PLT) and average inflation targeting (AIT) arises from the way in which these policy regimes cause inflation expectations to work as automatic...

Self-Organization of Inflation Volatility

We present a state-dependent pricing model that generates inflation fluctuations from idiosyncratic shocks to the cost of price changes of individual firms. A firm's nominal price increase, lowers other firms' relative prices, thereby inducing further nominal price increases. This snow-ball effect of repricing causes fluctuations to the aggregate price...

Sovereign Default Triggered by Inability to Repay Debt

The Greek sovereign default episode in 2012 was characterized by its high debt-to-GDP ratio and the severe economic contraction following the default. Conventional strategic default models designed to analyze a government's incentive to default often fail to replicate these characteristics. To address this issue, we provide a dynamic stochastic general...

Central Bank Swap Lines: Evidence on the Effects of the Lender of Last Resort

Theory claims that central-bank lending programs put ceilings on private lending rates, reduce ex post funding risk, and encourage ex ante investment. Testing for these effects is challenging. Most programs either have long precedents or were introduced in response to large shocks with multiple effects. Swap lines between advanced-economy central banks...

Tight Money-Tight Credit: Coordination Failure in the Conduct of Monetary and Financial Policies

Violations of Tinbergen's Rule and strategic interaction undermine monetary and financial policies significantly in a New Keynesian model with the Bernanke-Gertler accelerator. Welfare costs of risk shocks are large because of efficiency losses and income effects of costly monitoring, but they are larger under a simple Taylor rule (STR) and a Taylor...

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