02022cas a2200241 a 4500 AALejournalIMF006118 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451873795 1018-5941 BD-DhAAL BD-DhAAL Leigh, Daniel. Monetary Policy and the Lost Decade : Lessons from Japan / Daniel Leigh. Washington, D.C. : International Monetary Fund, 2009. 1 online resource (33 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper investigates how monetary policy can help ward off a protracted deflationary slump when policy rates are near the zero bound by studying the experience of Japan during the "Lost Decade" which followed the asset-price bubble collapse in the early 1990s. Estimation results based on a structural model suggest that the Bank of Japan's interest-rate policy fits a conventional forward-looking reaction function with an inflation target of about 1 percent. The disappointing economic performance thus seems primarily due to a series of adverse economic shocks rather than an extraordinary policy error. In addition, counterfactual policy simulations based on the estimated structural model suggest that simply raising the inflation target would not have yielded a lasting improvement in performance. However, a price-targeting rule or a policy rule that combined a higher inflation target with a more aggressive response to output would have achieved superior stabilization results. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2009/232 Full text available on IMF http://elibrary.imf.org/view/journals/001/2009/232/001.2009.issue-232-en.xml IMF e-Library