Papers - Fujiwara Ippei

Reconnecting Exchange Rate and the General Equilibrium Puzzle

Y Chen, I Fujiwara, Y Hirose

CAMA Working Paper  2020

A Technology-Gap Model of Premature Deindustrialization

I Fujiwara, K Matsuyama

CEPR Discussion Paper No. DP15530  2020

Business cycles and indeterminacy in economic models: a special issue in Honor of Professor Kazuo Nishimura

I Fujiwara, M Yano

Studies in Nonlinear Dynamics & Econometrics 23 (4), 20195002 (Studies in Nonlinear Dynamics and Econometrics)  23 ( 4 )  2019.09

ISSN  10811826

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On two notions of imperfect credibility in optimal monetary policies

I Fujiwara, T Kam, T Sunakawa

Economics Letters 174, 22-25 (Economics Letters)  174   22 - 25 2019.01

ISSN  01651765

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© 2018 Elsevier B.V. We explore how outcomes of optimal monetary policy with loose commitment (Schaumburg and Tambalotti, 2007; Debortoli and Nunes, 2010) with the non-reoptimization probability of [Formula presented] can be interpretable as outcomes of deeper optimal policy under sustainable plans (Chari and Kehoe, 1990) with [Formula presented]-period punishment. In a standard monetary-policy framework, we show that, for any sufficiently high value of [Formula presented], there exists an integer [Formula presented] such that impulse responses to the cost-push shock under each policy are similar to each other.

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Sustainable international monetary policy cooperation

I Fujiwara, T Kam, T Sunakawa

Journal of Economic Dynamics and Control 106, 103721  2019

Fiscal forward guidance: A case for selective transparency

Fujiwara I, Waki Y

Journal of Monetary Economics (Journal of Monetary Economics)  116   236 - 248 2019

Joint Work,  ISSN  03043932

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© 2019 Elsevier B.V. Should the fiscal authority use forward guidance to reduce future policy uncertainty perceived by private agents? Using dynamic general equilibrium models, we examine the welfare effects of announcing future fiscal policy shocks and show that selective transparency is desirable — announcing distortionary future policy shocks can be detrimental to ex ante social welfare, whereas announcing non-distortionary shocks generally improves welfare. Sizable welfare gains are found with constructive ambiguity regarding the timing of a tax increase in a realistic fiscal consolidation scenario. However, being secretive about distortionary shocks is time inconsistent, and welfare loss from communication may be unavoidable.

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Foreign exchange reserves as a tool for capital account management

S Davis, I Fujiwara, KXD Huang, J Wang

Globalization and Monetary Policy Institute Working Paper 117   473 - 488 2019

ISSN  03043932

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Recent theoretical papers argue that countries can insulate themselves from volatile world capital flows by using a variable tax on foreign capital as an instrument of monetary policy. But empirical papers argue that we rarely observe these cyclical capital flow taxes used in practice. We construct a small open economy model where the central bank engages in sterilized foreign exchange intervention. When private agents freely trade foreign bonds, sterilized intervention has no effect. But we prove that when frictions prevent the free trade in foreign bonds, optimal sterilized foreign exchange intervention is equivalent to an optimal tax on foreign capital. The model is then calibrated to match the levels of capital account restrictions that we observe in the data. For levels of capital account openness that we observe in many emerging market economies, a variable tax on capital flows is a close approximation for sterilized foreign exchange intervention.

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Private news and monetary policy-Forward guidance as Bayesian persuasion

I Fujiwara, Y Waki

CAMA Working Paper  2019

Generational war on inflation: optimal inflation rates for the young and the old

I Fujiwara, S Hori, Y Waki

Globalization and Monetary Policy Institute Working Paper  2019

Dealing with time inconsistency: Inflation targeting versus exchange rate targeting

JS Davis, I Fujiwara, J Wang

Journal of Money, Credit and Banking 50 (7), 1369-1399 (Journal of Money, Credit and Banking)  50 ( 7 ) 1369 - 1399 2018.10

ISSN  00222879

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© 2018 The Ohio State University Adopting a single instead of multiple targets can be an effective way to overcome the classic time-inconsistency problem. The choice of a single mandate depends on the trade openness and the credibility. Reduced-form empirical results show as central banks become less credible, they are more likely to adopt a pegged exchange rate, and the tendency to peg depends on trade openness. In a model with “loose commitment,” as credibility falls, either an inflation target or a pegged exchange rate is more likely to be adopted. A relatively closed (highly open) economy would adopt an inflation target (exchange rate peg).

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The optimal degree of monetary discretion in a new Keynesian model with private information

Y Waki, R Dennis, I Fujiwara

Theoretical Economics 13 (3), 1319-1367 (Theoretical Economics)  13 ( 3 ) 1319 - 1367 2018.09

ISSN  19336837

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Copyright © 2018 The Authors. This paper considers the optimal degree of monetary discretion when the central bank conducts policy based on its private information about the state of the economy and is unable to commit. Society seeks to maximize social welfare by imposing restrictions on the central bank's actions over time, and the central bank takes these restrictions and the new Keynesian Phillips curve as constraints. By solving a dynamic mechanism design problem, we find that it is optimal to grant “constrained discretion” to the central bank by imposing both upper and lower bounds on permissible inflation, and that these bounds should be set in a history-dependent way. The optimal degree of discretion varies over time with the severity of the time-inconsistency problem, and although no discretion is optimal when the time-inconsistency problem is very severe, it is a transient phenomenon and some discretion is granted eventually.

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Comment on “Why Has Japan Failed to Escape from Deflation?”

Fujiwara Ippei

Asian Economic Policy Review (Blackwell Publishing)  13 ( 1 ) 42 - 43 2018.01

ISSN  1832-8105

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Foreign Exchange Reserves as a Tool for Capital Account Management in a Small Open Economy

JS Davis, I Fujiwara, KXD Huang, J Wang

 2018

Is Exchange Rate Disconnected After All?

YC Chen, I Fujiwara, Y Hirose

Unpublished  2018

Exchange Rate is Disconnected after All

YC Chen, I Fujiwara, Y Hirose

 2018

Comment on'Why Has Japan Failed to Escape from Deflation?'.

I Fujiwara

Asian Economic Policy Review 13 (1)  2018

Optimal monetary policy in open economies revisited

Fujiwara Ippei, Wang Jiao

Journal of International Economics (ELSEVIER SCIENCE BV)  108   300 - 314 2017.09

ISSN  0022-1996

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<p>This paper revisits optimal monetary policy in open economies, in particular, focusing on the noncooperative policy game under local currency pricing in a two-country dynamic stochastic general equilibrium model. We first derive the quadratic loss functions which noncooperative policy makers aim to minimize. Then, we show that noncooperative policy makers face extra trade-offs regarding stabilizing real marginal costs induced by deviations from the law of one price under local currency pricing, and that optimal monetary policy seeks to stabilize CPI inflation rates and more so under noncooperation than it does under cooperation. As a result of the increased number of stabilizing objectives, welfare gains from cooperation emerge even when two countries face only technology shocks. Still, gains from cooperation are not large, implying that frictions other than nominal rigidities are necessary to strongly recommend cooperation as an important policy framework to increase global welfare.</p>

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Financial frictions and policy cooperation

Fujiwara Ippei, Teranishi Yuki

Journal of International Economics (ELSEVIER SCIENCE BV)  104   19 - 43 2017.01

ISSN  0022-1996

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<p>Do financial frictions call for cross-border policy cooperation? This paper investigates the implications of financial frictions in the form of staggered loan contracts supplied by monopolistic banks, for monetary policy. Using the linear quadratic (LQ) framework, we show that policy cooperation yields long-run gains in addition to gains from stabilizing inefficient fluctuations over the business cycle, as usually found in models with price rigidities. The Ramsey optimal steady states differ between cooperation and noncooperation. Such gains from cooperation arise irrespective of capital account liberalization.</p>

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Dealing with Time-inconsistency: Inflation Targeting vs. Exchange Rate Targeting

I Fujiwara, S Davis

2017 Meeting Papers  2017

Fiscal forward guidance

I Fujiwara, Y Waki

RIETI Discussion paper  2017