Monetary Policy Adopted On Bubble Economy Period Of...

The topic of this dissertation is to discuss the monetary policy adopted in bubble economy period of Japanese. As Japanese economics is a specific example around the world. The Japanese government adopted many effective ways to revitalize the economy with the result that its economy rose abruptly after the World war II. However, because Japan entered a liquidity trap around 1990s, and experienced a â€Å"Lost Decade† (Hiyashi and Prescott, 2002), the government experienced many economic problems such as of slow growth, deflation, and continues nethermore output (Daniel, 2009) In this dissertation, the following parts will be given: Literature review, data description, test result discussion and conclusion. Briefly speaking, the literature†¦show more content†¦Finally, a conclusion will be provided at the end of this section. At the end of this dissertation, there is a final conclusion will be given, the conclusion will cover the reason whether the monetary policy adopted by Bank of Japan was wrong. It will also give some suggestions about the monetary policy according to Japan’s economy. In general, the point of this dissertation is to focus on the monetary policy of Japan during bubble economy period and to identify whether Bank of Japan did right or wrong in such period. Literature Review The background of Japanese Monetary policy in Bubble economy period As Walsh (2003) said that, ‘a social loss function dependent on inflation and output gap is the appropriate objective of monetary policy’ which indicates that the level of inflation and output are the major factors that affect monetary policy of all countries. Moreover, Castelnuovo and Surico (2010) claimed that inflation are the key elements to decided a monetary policy for a county. For the Japan economy, it experienced a disaster during the period 1986-1991, which named Japanese asset price bubble (Wood, Christopher, 2005). It leaded a long term economic depression japan after that. The main reason for the bubble economy is the extremely high inflation rate and output. As mentioned before, Japan was sustained a rapid development after world war II, the main industry of Japan is manufacturing industry. After the Plaza Accord