Keyword: interest rate

Karl-Friedrich Israel; Tim Florian Sepp; Nils Sonnenberg

Abstract

This article analyzes the impact of monetary policy on household saving in Japan between 1993 and 2017. Using annual data from the Japan Panel Survey of Consumers it is shown that monetary expansion has contributed to a widening gap in households’ net saving through an adverse effect on the volume of saving of non-academic households. In contrast, households with at least one academic tend to be able to compensate these adverse effects of monetary expansion or can even benefit from it. The article documents how inequality in terms of the ability to build up wealth has increased in Japan over the past decades. The statistical analysis controls for household size as well as potential spatial effects in the transmission mechanism of monetary policy on household saving.

Keywords: household saving, inequality, interest rate, Japan, Monetary policy.

JEL Codes: D31, D63, E52, E58.

Erschienen in

Applied Economics, 1-17.

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Gunther Schnabl

Abstract

Japan experienced a boom-and-bust cycle in the real estate and stock markets almost 20 years earlier than Europe. Since the bursting of the Japanese bubble economy, the country has fallen into a deep recession and has experimented with crisis therapies in the form of unconventional monetary expansion, Keynesian fiscal stimulus, and recapitalization of financial institutions. Japan reached a low interest rate environment in the mid 1990s and has accumulated an exceptionally high level of public debt during more than two decades of economic stagnation. This paper compares the boom-and-bust cycles in Japan and Europe with respect to the reasons for excessive booms, the characteristics of the crises, and the (potential) effects of the crisis therapies. It is argued that in both Japan and Europe the consequences of expansionary monetary and fiscal policies include the hysteresis of a low-interest rate and high government debt environment, the erosion of the allocation and signaling functions of the interest rate, the gradual quasi-nationalization of financial institutions, as well as gradual real income losses. The economic policy implication for Europe and Japan is the timely exit from crisis therapies in the form of excessively expansionary monetary and fiscal policies.

Keywords: boom-and-bust, crisis, crisis therapies, economic stagnation, Europe, fiscal policies, interest rate, Japan, Keynesian fiscal stimulus, monetary expansion, Public debt, recapitalization of financial institutions, recession.

JEL Codes: E00, E60, E62, E66, F00, N00, O10.

Erschienen in

Asian Economic Papers, Volume 14, Issue 1, pp 124-150.

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Gunther Schnabl

Abstract

China has made several important steps to liberalise its domestic financial markets and to open up its capital markets internationally in order to promote the renminbi as an international currency. To make the renminbi a convertible, freely floating international currency is a pre-requisite for the renminbi to challenge the dollar as an international currency. The chapter shows, however, that the very benign liquidity conditions in the US, combined with very large foreign currency denominated assets, constitute an insurmountable impediment for the floating and the internationalisation of the renminbi. With exchange-rate stability being seen as an important determinant of macroeconomic stability and growth in China (and East Asia), domestic-wage increases are proposed in order to reduce the appreciation pressure on the Chinese currency.

Keywords: Central Bank, Exchange Rate, Foreign Direct Investment, interest rate, Real Exchange Rate.

Erschienen in

Rövekamp F., Bälz M., Hilpert H. (eds) Central Banking and Financial Stability in East Asia. Financial and Monetary Policy Studies, vol 40. Springer, Cham.

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