Focusing on policymaking under uncertainty, we analyze the monetary policy of the Bank of Japan (BOJ) in the early 1990s, when the bubble economy collapsed. Conducting stochastic simulations with a large- scale macroeconomic model of the Japanese economy, we find that the BOJf s monetary policy...

In this paper, we set out the Japanese Economic Model (JEM), a large-scale macroeconomic model of the Japanese economy. Although the JEM is a theoretical model designed with a view to overcoming the Lucas ( 1976) critique of traditional large-scale macroeconomic models, it can also be used for...

How should central banks take into account movements in asset prices in the conduct of monetary policy? We provide an analysis to address this issue using a dynamic stochastic general equilibrium model incorporating both price rigidities and financial market imperfections. Our findings are...