Japan: Poster child for NGDP Targeting


This take on Japan provides the clearest demonstration that nominal spending, determined by the Central Bank´s monetary policy, is crucial to the macroeconomic outcome. It is also a reminder that no matter how much ‘fiscal stimulus’ a government provides, if monetary policy does not provide support, there´s nothing to be gained and a lot to lose in terms of high debts and deficits. Finally, the Japanese experience demonstrates the danger inherent in a monetary policy geared, unwaveringly, to the attainment of ‘price stability’ or ‘inflation targeting’ on steroids.

The Big Picture

The chart illustrates how the Japanese economy evolved during the decades following WWII. We identify three stages of the growth process. In stage one, from the 1950s to early 1970s, Japan was ‘catching up’ or narrowing the gap relative to the US. From that point up to the end of the 1980s the gap remained relatively constant but began…

View original post 1,401 more words

One thought on “Japan: Poster child for NGDP Targeting

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.