Faculty of Economics
2-15-45, Mita, Minato-ku
Tel: +61 2 6125 4705
Fax: +61 2 6125 5448
Institutional Affiliations: Keio University and Australian National University
Information about this author at RePEc
NBER Working Papers and Publications
|October 2011||Optimal Monetary Policy with Endogenous Entry and Product Variety|
with Florin O. Bilbiie, Fabio Ghironi: w17489
We show that deviations from long-run stability of product prices are optimal in the presence of endogenous producer entry and product variety in a sticky-price model with monopolistic competition in which price stability would be optimal in the absence of entry. Specifically, a long-run positive (negative) rate of inflation is optimal when the benefit of variety to consumers falls short of (exceeds) the market incentives for creating that variety under flexible prices, governed by the desired markup. Plausible preference specifications and parameter values justify a long-run inflation rate of two percent or higher. Price indexation implies even larger deviations from long-run price stability. However, price stability (around this non-zero trend) is close to optimal in the short run, even ...
"Optimal Monetary Policy with Endogenous Entry and Product Variety" with Florin O. Bilbiie, Ippei Fujiwara, Journal of Monetary Economics, forthcoming. citation courtesy of
|March 2011||Global Liquidity Trap|
with Tomoyuki Nakajima, Nao Sudo, Yuki Teranishi: w16867
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. Compared to the closed economy case, a notable feature of the optimal policy in the face of a global liquidity trap is its international dependence. 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 high...
Published: Fujiwara, Ippei & Nakajima, Tomoyuki & Sudo, Nao & Teranishi, Yuki, 2013. "Global liquidity trap," Journal of Monetary Economics, Elsevier, vol. 60(8), pages 936-949. citation courtesy of