The optimal choice of a monetary policy instrument depends on how tight and transparent the available instruments are and on whether policymakers can commit to future policies. Tightness is always desirable; transparency is only if policymakers cannot commit. Interest rates, which can be made...

In standard approaches to monetary policy, interest rate rules often lead to indeterminacy. Sophisticated policies, which depend on the history of private actions and can differ on and off the equilibrium path, can eliminate indeterminacy and uniquely implement any desired competitive...

Japan suffered a very high inflation rate in 1973-74. The CPI inflation rate rose to near 30% in 1974, the highest rate in the postwar Japanese history after the chaotic hyperinflation following the end of the Second World War. Traditionally, the oil crisis is blamed for the 1973-74 high...

The paper aims at explaining why the Bank of Japan has not adopted inflation targeting, despite calls for such a policy. Disclosed minutes of the Monetary Policy Meetings of the Bank of Japan, after March 1998, as well as Speeches by its members give clues to changing reasons against inflation...

This paper reviews Japanese monetary policy over the last two decades with an emphasis on the experience of deflation from the mid-1990s. The paper is quite critical of the conduct of monetary policy, particularly from 1998 to 2003. The Bank of Japan's rhetoric was not helpful in fighting...

We present a pricing kernel that summarizes well the main features of the dynamics of interest rates and risk in postwar U.S. data and use it to uncover how the pricing kernel has moved with the short rate in this data. Our findings imply that standard monetary models miss an essential link...

We study the implications for international relative prices of a simple Ricardian model of international trade with imperfect competition and variable markups, providing a tractable account of firm-level and aggregate prices. We show that both trade costs and imperfect competition with variable...

The paper tests the Balassa-Samuelson hypothesis (rapid economic growth is accompanied by real exchange rate appreciation because of differential productivity growth between tradable and nontradable sectors) using data of the APEC economies. Japan, Korea, Taiwan and, to a lesser extent, Hong...

This paper examines Japanese foreign exchanges interventions from April 1991 to March 2001 based on newly disclosed official data. All the yen-selling (dollar-purchasing) interventions were carried out when the yen/dollar rate was below 125, while all the yen-purchasing (dollar-selling)...

This paper analyzes and estimates the reaction function of the Japanese monetary authorities in deciding when to intervene in the foreign exchange (forex) markets, using daily Japanese intervention data from April 1, 1991 to December 31, 2002. This paper is the first in estimating the reaction...