Possible depreciation of the US dollar for unsustainable current account deficit in the United States

Zahlungsbilanzungleichgewicht, US-Dollar, Vereinigte Staaten, Balance of payments imbalances, US Dollar, United States

How much depreciation of the US dollar for sustainability of the current accounts?

In this paper, we conduct a simulation analysis to investigate how much depreciation of the US dollar is needed to reduce the current account deficits in the near future. We use some VAR models to estimate relationships between the exchange rate of the US dollar and the current accounts in the United States. We conclude that some scenarios of the US dollar depreciation would reduce the current account deficits to a level under 2% of GDP in the next several years. The results are regarded as robust for each of the scenarios thought they depend on our supposed VAR models.US dollar depreciation, Current account sustainability, Investment-saving balance, International trade flows, Vector Autoregression (VAR)

Very Low Interest Rate Policy under Imperfect Capital Mobility

After the global financial crisis, very low interest rate policy, whichincludes a zero interest rate policy (ZIRP) or a quantitative easing policy(QEP)，spread throughout the United States, Japan, and Europe.International capital movements did not respond to returns sufficiently,because international investors had become more sensitive to risks duringthe financial crisis. In this paper, we construct a two-country modelwith imperfect capital mobility and the difference of the price-adjustmentspeed between countries. We characterize the optimal response ofmonetary policies to an asymmetric productivity shock by conductingnumerical analyses. There were three primary results of our analysis.First, there exists a policy objective trade-off between output stabilityand optimal allocation of resources. The slightly tight monetary policywas found to be optimal, in the sense of the marginal cost equalization ofthe two objectives. Second, the higher the sensitivity of internationalcapital mobility to a difference of returns, the smaller the interest cutnecessary. Third, if capital is completely immobile between sectors, thepolicy rule insisted by Aoki (2001) is the optimal response

Fiscal Consolidation and Sustainability of Japan\u27s Public Debt after the Global Financial Crisis

After the 2008 global financial crisis, the sustainability of public indebtedness has become a central public policy issue in the United States, Europe, and Japan. In the United States especially, the public debt ceiling has become a continuing source of concern and political dispute. This paper employs Japanese Long-term Economic Statistics (LTES) to investigate the sustainability of Japan\u27s public debt and changes in fiscal discipline after the 2008 global financial crisis.First, results of the unit-root test show that the level of Japan\u27s public debt has become unsustainable after the crisis. Second, the 2008 global financial crisis has destroyed Japan\u27s fiscal discipline, which had been relatively strong before the crisis. Third, fiscal discipline was strong between the Russo?Japanese War and World War I and for several decades following World War II. It was relatively strong during the fiscal consolidation period in the latter 1980s. We thus conclude that post-war fiscal discipline in Japan resembled the pre-war period despite the absence of military expenses after World War II. Although fiscal consolidation could reduce public debt to some degree, the level of public debt in 2017 might generate high inflation in the future, as it did after World Wars I and II.松本睦樹教授定年退職記念号In Honour of Prof. Mutuki Matumot

Monetary and Fiscal Policy in a Liquidity Trap:The Japanese Experience 1999-2004

We characterize monetary and fiscal policy rules to implement optimal responses to a substantial decline in the natural rate of interest, and compare them with policy decisions made by the Japanese central bank and government in 1999.2004. First, we find that the Bank of Japan\u27s policy commitment to continuing monetary easing until some prespecified conditions are satisfied lacks history dependence, a key feature of the optimal monetary policy rule. Second, the term structure of the interest rate gap (the spread between the actual real interest rate and its natural rate counterpart) was not downward sloping, indicating that the Bank of Japan\u27s commitment failed to have sufficient influence on the market\u27s expectations about the future course of monetary policy. Third, we find that the primary surplus in 1999.2002 was higher than predicted by the historical regularity, implying that the Japanese government deviated from the Ricardian rule toward fiscal tightening. These findings suggest that inappropriate conduct of monetary and fiscal policy during this period delayed the timing to escape from the liquidity trap

Monetary and Fiscal Policy in a Liquidity Trap: The Japanese Experience 1999-2004

We characterize monetary and fiscal policy rules to implement optimal responses to a substantial decline in the natural rate of interest, and compare them with policy decisions made by the Japanese central bank and government in 1999-2004. First, we find that the Bank of Japan's policy commitment to continuing monetary easing until some prespecified conditions are satisfied lacks history dependence, a key feature of the optimal monetary policy rule. Second, the term structure of the interest rate gap (the spread between the actual real interest rate and its natural rate counterpart) was not downward sloping, indicating that the Bank of Japan's commitment failed to have suffcient influence on the market's expectations about the future course of monetary policy. Third, we find that the primary surplus in 1999-2002 was higher than predicted by the historical regularity, implying that the Japanese government deviated from the Ricardian rule toward fiscal tightening. These findings suggest that inappropriate conduct of monetary and fiscal policy during this period delayed the timing to escape from the liquidity trap.

Regional Inequality Simulations Based on Asset Exchange Models with Exchange Range and Local Support Bias

To gain insights into the problem of regional inequality, we proposed new regional asset exchange models based on existing kinetic income-exchange models in economic physics. We did this by setting the spatial exchange range and adding bias to asset fraction probability in equivalent exchanges. Simulations of asset distribution and Gini coefficients showed that suppressing regional inequality requires, firstly an increase in the intra-regional economic circulation rate, and secondly the narrowing down of the exchange range (inter-regional economic zone). However, avoiding over-concentration of assets due to repeat exchanges requires adding a third measure; the local support bias (distribution norm). A comprehensive solution incorporating these three measures enabled shifting the asset distribution from over-concentration to exponential distribution and eventually approaching the normal distribution, reducing the Gini coefficient further. Going forward, we will expand these models by setting production capacity based on assets, path dependency on two-dimensional space, bias according to disparity, and verify measures to reduce regional inequality in actual communities.Comment: 14 pages, 8 figures. Published online at http://redfame.com/journal/index.php/aef/article/view/494