It s Baaack! Japan s Slump and the Return of the Liquidity Trap 1998 2001 8 29-9 9 Ver.1.0.1 1 2 2 5 2.1..................................... 5 2.2......................... 6 2.3......................... 8 2.4.............................. 11 2.5 q.................................... 13 2.6................................... 14 2.7 Monetary Aggregates........................... 16 2.8.......................................... 19 2.9..................................... 20 2.10........................................... 24 3 25 3.1........................................ 25 3.2........................................ 30 http://web.mit.edu/krugman/www/bpea jp.pdf c 1998 Paul Krugman http://web.mit.edu/krugman/www/ c 2001 YAMAGATA Hiroo http://www.post1.com/home/hiyori13/ Special TNX to & katok & 1
3.3........................................ 32 3.4............................ 35 4 39 41 Appendix 42 Appendix A: Monetary Aggregate............ 42 Appendix B:................ 44 Appendix C:............................. 45 46 1 1937 IS-LM thrift widow s curses 1930 1940 1930 1940 0.014% 1930 1963 broad aggregates 2
EconLit 1975 21 1% 1991 pump-prime prime IS-LM 3 50 GDP IS-LM 1930 3
monetary aggregates monetary aggregates monetary aggregates monetary base monetary aggregate monetary aggregate 4
2 2.1 monetary base 1930 1990 5
[ 1] (outside) monetary base monetary aggregates outside monetary base monetary base / outside ) [ 2] 2.2 IS-LM IS-LM IS-LM 6
IS-LM i t representative agent y t U = 1 c 1 ρ t D t (1) 1 ρ c ρ D i t P t c t M t y M 2 P = M /y i = (1 D)/D 1 + 7
1 Pc = Py = M P = M/y (2) 1 1 1 1/P 2 (1 + i)/p 1 C ρ 2 D(c ) ρ (c/c ) ρ = DP(1 + i)/p (3) 1 + i = P DP (y /y) 1/ρ (4) P P i 1 MM CC 1 1 MM 2.3 1 1 1 2 8
1: 2 CC 1 2 MM CC 3 MM 2 2 1 1930 M P 9
M /M P /P M M 2 1 (y/y ) 1/ρ D (5) P P 10
[ 3] 2.4 1 y f 1 2 y 1 2 y IS c = y = y (P /DP) 1/ρ (1 + i) 1/ρ (6) 2 IS MM y = M/p (7) 2 3 P P y f 11
2: outside 12
2.5 q 1 5-6% q A L t t q t q t A t = w t L t (8) w t q R t r t 1 + r t = R t+1 + q t+1 q t (9) 1 8% 13
2.6 Smithers (1998) GDP 10% IS-LM GDP 14
IS-LM T N U = 1 1 ρ t D t[ c τ T t c 1 τ N t ] 1 ρ (10) N T r T ρ = 1 (10) U = D t[ τ ln(c Tt ) + (1 τ) ln(c Nt ) ] (11) t 1 + r t = D 1 (c t+1 /c t ) 15
ρ = 1 ρ 2.7 Monetary Aggregates aggregate 3 monetary base M2 1929 = 100 ): monetary base 1930 M2 1/3 1929 1939 [Friedman and Schwartz (1963)] M2 aggregate [Bernanke (1994)] [Cooper and Corbae (1997)] 16
250 200 150 Index, 1929=100 M2 Aggregate 100 50 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 Source Temin 1976, p.51 "!$#&%('*) 3: 1929-39 [ Temin (1976)] monetary aggregates monetary aggregates Diamond-Dybvig Appendix A Diamond and Dybvig (1982) 1 2 1 1 2 2 Diamond and Dybvig 17
1. 2. 3. representativeagent ex ante ex post 1 monetary aggregate 3 + (credit) monetary aggregate 18
1. aggregate 2. 2 3. monetary aggregate aggregate 2.8 IS-LM representative-agent [ 4] 2 19
+ 1 Romer 1992) 1929-33 [ 5] ex ante 5 10% [ 6] 2.9 (6) P IS 20
1933-41 1992 1. 2.? [Friedman 1969] 3. 4. 21
[Mundell (1963)] [Fleming (1962)] IS-LM 1 Bryant et al (1988) 11 GDP 1% [ 7] IS-LM (10) Appendix B GDP GDP Appendix B ρ B = (12) 1 ρ 1 τ ρ τ 22
DRI -8.1-0.02 EEC -4.0-0.07 EPA -5.3-0.03 LINK -2.3-0.01 LIVERPOOL -39.0-3.1 MCM -4.0-0.05 MINIMOD -5.7-0.07 MSG -6.7-0.21 OECD -1.6-0.13 VAR -7.6-0.04 WHARTON -1.4-0.17-5.3-0.03 Frankel (1988) a. Frankel b. GNP 1: GNP 1% ρ = 1 1 1 τ 2 ρ τ 2 0.2 5% GDP 1% Smithers (1998) GDP 1% τ 1 τ 23
τ ρ 0.2 0.3 0.4 2 0.167 0.231 0.286 3 0.286 0.375 0.444 4 0.375 0.474 0.545 2: τ ρ 0.2 0.3 0.4 2 1.67 1.54 1.43 3 2.14 1.88 1.67 4 2.5 2.11 1.82 3: appendix 1 + 1 τ τ 1 ρ 1 ρ 1/τ 3 1 (13) 2.10 monetary aggregate aggregates 24
dereliction monetary aggregates 3 3.1 4 1981 1991 1991 1992 1991 1992 1998 GDP 4% 1981-92 3.7% 3.7% 1998 14% 1995 1% 1998 0.43% 25
( %) GDP 1981 3.2 4.1 2.2... 1982 3.1 1.8 2.4... 1983 2.3 1.8 2.7... 1984 3.9 2.6 2.7 6.5 1985 4.4 2.1 2.6 6.6 1986 2.9 1.8 2.8 5.1 1987 4.2 0.1 2.8 4.2 1988 6.2 0.7 2.5 4.5 1989 4.8 2.0 2.3 5.4 1990 5.1 2.3 2.1 7.7 1991 3.8 2.7 2.1 7.2 1992 1.0 1.7 2.2 4.3 1981 92 3.7 2.0 2.5 5.7 1993 0.3 0.6 2.5 2.9 1994 0.6 0.2 2.9 2.3 1995 1.5 0.6 3.1 1.2 1996 3.9 0.5 3.4 0.6 1997 0.9 0.6 3.4 0.6 1993 97 1.4 0.1 2.4 1.5 International Financial Statistics, 1998 4: 1981-97 GDP 1981-91 4 3 1% 6% 2.5% 1997 3.4% 1997 5% 26
0.4 0.3 1983 1982 0.2 1986 0.1 1984 1987 0 1991 2 2.5 3 3.5 4 4.5 5 5.5 6 6.5-0.1 1985-0.2-0.3 1989 1990 1988-0.4 4: 1998 10% IMF (International Monetary Fund) Hodrick-Prescott Giorno et. al. 1995 secular Hodrick-Prescott Hodrick-Prescott / 5 λ 25 λ 1935 27
4.8 4.7 4.6 ln GDP 4.5 4.4 4.3 4.2 1919 1921 1923 1925 1927 1929 1931 "!$#&%(')*,+ 1933 1935 1937 1939 5: GDP Hodric Prescott 1919-39 4 3 2 1 0-1 -2-3 1982 1983 Source: OECD Economic Outlook, June 1998 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 6: OECD 1982-97 1995 1996 1997 28
4.5 4.0 3.5 3.0 2.5 2.0 1.5 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 7: OECD 1987-97 OECD 6 Giorno et al 1995); 1997 1.2% OECD Hodrick-Prescott OECD Giorno et al 1995 OECD Economic Outlook 7 3 OECD 3% 1.6 3% 1994 1997 4.6% 1997 3 4% 2 3% 1998 1998 7% 1998 8% 5% 29
( %) 1991 57.1 67.1 1992 57.8 67.6 1993 58.6 68.0 1994 59.7 67.8 1995 60.1 68.2 1996 59.9 68.2 1997 60.6 67.9 International Financial Statistics, 1998 5: GDP 3.2 5 1991 /GDP 1990 1997 GDP 7% GDP 7% 1980 GDP 3% 3-4% Bryant et al (1988) - 6 GDP 1 30
DRI -4.3 EEC -4.4 EPA -5.3 LINK -1.9 LIVERPOOL -2.2 MCM -4.3 MINIMOD -2.9 MSG -3.3 OECD -2.3 TAYLOR -0.7 VAR -0.4 WHARTON -5.3-3.1 Frankel (1988, pp.21-23) 1 6: GDP 1% - - 3% 1990 1990 1990 31
1980 x.x 3 xx x.x OECD 1997) xx x.x 4 q q 1980 1980 3.3 1 1980 thrift 5 3 1.2% 4 1998 2000 0.2% 2001 5 Thrift 1990 32
( 1994=100) M2+ 1994 100.0 100.0 100.0 1995 107.8 103.3 100.8 1996 117.0 106.5 100.6 1997 125.6 110.6 100.9 International Financial Statistics, 1998 7: 1994-97 7 1994 monetary aggregate aggregate thrift McKinnon and Pill (1997), Krugman (1998), Corsetti et al (1998) ) 33
thrift 6 Cargill et al (1997) 1990-91 thrift Cargill et al 1994 11 1997 1997 1998 1997 1997 1998 4 1997 put 6 34
1990-92 3.4 3 1992 pump priming 35
7% 10 0.7% 10 Brainard : 36
1997 : Nouriel Roubini 3 x y Appendix C 7 7 37
DRI -0.82 EEC -1.80 LINK -0.64 MCM -0.68 MINIMOD -0.30 OECD -0.94 TAYLOR -0.30 WHARTON -2.7-0.75 Bryant et al (1988) 1 8: GDP 1% 10 5% 8 GDP 1% 5% 38
4-5% 8 3 3.75% 4% 15 1% 5% 20 25% 4 20 39
3.5% EMU 40
Bernanke, B. (1994) The macroeconomics of the Great Depressions: a comparative approach NBER working paper #4814. Bryant, R., Henderson, D., Holtham, G., Hooper, P., and Symansky, S.,eds. (1988): Empirical Macroeconomics for Interdependent Economies, Washington: Brookings. Cargill, T., Hutchinson, M., and Ito, T. (1997), The Political Economy of Japanese Monetary Policy, Cambridge: MIT Press. Cooper, R., and Corbae, D. (1997), Financial Fragility and the Great Depression, NBER Working Paper #6094 Corsetti, G., Pesenti, P. and Roubini, N. (1998), Paper Tigers? A Preliminary Assessment of the Asian Crisis (mimeo) Diamond, D. and Dybvig, P. (1983), Bank runs, deposit insurance, and liquidity, JPE 91, 401-19. Fleming, M. (1962), Domestic financial policies under fixed and under floating exchange rates, IMF Staff Papers 9, 369-79. Friedman, M. (1969), The Optimum Quantity of Money and other Essays, Chicago: Aldine. Friedman, M. and Schwartz, A. (1963), A Monetary History of the United States, Princeton: Princeton University Press. Giorno, C., Richardson, P., Roseveare, D. and van den Noord, P. (1995), Potential output, output gaps and structural budget balances, OECD Economic Studies 24, 167-208. Hicks, J.R. (1937), Mr. Keynes and the classics, Econometrica Krugman, P. (1998), What happened to Asia?, mimeo. McKinnon, R. and Pill, H. (1997), Credible economic liberalizations and overborrowing, American Economic Review 87, 189-93. Metzler, L. (1951), Wealth, saving, and the rate of interest, Journal of Political Economy 54, 93-116. Mundell, R. (1963), Capital mobility and stabilization policy under fixed and flexible exchange rates, Canadian Journal of Economics and Political Science, 29, 475-85. Romer, C. (1992), What ended the Great Depression?, Journal of Economic History 52, 757-84. OECD (1997), Economic Survey of Japan, Paris: OECD Smithers, A. (1998), Japan s problems of debt and demography, Smithers and Co. Temin, P. (1976), Did Monetary Forces Cause the Great Depression? New York: W.W. Norton. 41
Appendix Appendix A: Monetary Aggregate monetary aggregate appendix Diamond-Dybvig 2 1 y 1 2 y 2 U = HU 1 (c 1 ) + (1 H)U 2 (c 2 ) (14) H π 1 1 π 0 π 1 π fiat-money Diamond-Dybvig M H = 1 1. M 42
2. 3. 4. 5. / 6. 7. 1 1 y 1 + y 2 /(1 + r) 1 π [ π y 1 + y ] 2 = y 1 (15) 1 + r 1 + r = π y 2 (16) 1 π y 1 1 Pc 1 π 1/π 1 π outside-money M M 3 1. 2. 3. 43
1 3 aggregates Appendix B: / 1 c T c N = τ 1 τ (17) U c T = τc τ(1 ρ) 1 T c (1 τ)(1 ρ) N (18) c N GDP c T GDP c T (18) 2 U 2 c 2 T = τ(τ(1 ρ) 1)c τ(1 ρ) 2 T c (1 τ)(1 ρ) N (19) 44
2 U = τ(1 τ)(1 ρ)c τ(1 ρ) 1 T c (1 τ)(1 ρ) 1 N (20) c T c N c T c N = 2 U c T c N 2 U 2 c 2 T (1 τ)(1 ρ) c T = = τ(1 ρ) 1 c N 1 ρ 1 ρ 1 τ (21) Appendix C: 45
1. wealth effect Metzler (1951) Metzler outside 2. 3. 46
4. 1 8 5. 1941 8 1999 1998 47
1940 GDP 1933 70% 1929 11% Gordon, 1988) 1939 1939 1940 8% 6. commercial paper commercial vs. T-bill T-bill 1933 0.515 % 1930 7. 2 GDP 0.1 5% GDP 1% 350 48