“Deflation and Monetary Policy” by Hiroshi Yoshikawa
Deflation is a threat to the macroeconomy. Japan had suffered from deflation for more than a decade, and now, Europe is facing it. To combat deflation under the zero interest bound, the Bank of Japan and the European Central Bank have resorted to quantitative easing (QE) or increasing money supply, and at last, in February 2016, introduced the negative interest rate. I explore the effectiveness of these monetary policies. Toward this goal, I begin by discussing fundamental problems of modern micro-founded macroeconomics.