Effectiveness of state-contingent monetary policy under a liquidity trap

Ippei Fujiwara, Naoko Hara, Kentaro Yoshimura

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)


Recent economic developments in Japan suggest that there is a growing interest in how monetary policy should be conducted under low inflation and nominal interest rates. In this paper, we first confirm the effectiveness of conventional wisdom against a liquidity trap, namely taking aggressive responses around the zero bound and variant of price level targeting so that it can intensify the policy duration effect, in the large scale dynamic general equilibrium model, the JEM (Japanese Economic Model). We then show that the optimal tangible policy rules around the zero bound are possibly state-contingent at the same time. J. Japanese Int. Economies 20 (3) (2006) 364-379.

Original languageEnglish
Pages (from-to)364-379
Number of pages16
JournalJournal of The Japanese and International Economies
Issue number3
Publication statusPublished - 2006 Sept 1
Externally publishedYes


  • Monetary policy
  • Zero bound of nominal interest rates

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations


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