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"Zero Bound on Nominal Interest Rate and Optimal Monetary Policy"


Taehun Jung, Yuki Teranishi, Tsutomu Watanabe

Abstract

短期名目金利をゼロにまで引き下げてもなお総需要が弱いときに中央銀行に何ができるであろうか?この問いに取り組むために我々は名目金利の非負制約を明示的に取り扱う状況での中央銀行の通時的損失最小化問題を解く。総需要への負のショックを所与として、中央銀行が短期名目金利の将来の経路に対するコミットメントが可能であるという仮定の下での最適な名目金利の経路を計算する。景気が回復した後でもゼロ金利を継続するべきである、という意味で最適経路は歴史依存であることを明らかにする。そのようなコミットメントを行うことで、金利の自然率が定常状態での水準よりも大幅に下落した場合でも中央銀行はより高いインフレ予想を促し、長期名目金利を引き下げ、自国通貨を減価させることができる。

1. Introduction

短期名目金利がゼロに非常に近いとき、短期証券もしくは金融政策手段となる債券と貨幣の代替性は非常に高くなり、それ以上の金融緩和を行うことが極度に難しくなる。名目金利のゼロ下限、もしくは流動性の罠と呼ばれるこの現象はKeynes (1936) をはじめ多くの研究者によって研究されてきた。しかしながら、流動性の罠はごく最近まで現実世界で観察されることがなかったために、純粋に理論的な教科書の中の問題としてとらえられる傾向があった。

This situation changed on February 12, 1999, when the Bank of Japan (BOJ) made anannouncement of lowering overnight interest rates to be "as low as possible" to stimulate theJapanese economy, which was then believed to be at the edge of a deflationary spiral. Followingthis announcement, the BOJ provided ample liquidity to the interbank money market until the uncollateralized overnight call rate reached zero (actually two basis points). These developmentsin Japanese monetary policy have alerted researchers and practitioners, inside and outside thecountry, that the same phenomenon could take place even in other industrialized countrieswhere inflation has fallen to very low levels.
この状況は1999年2月12日に変わった。日本銀行が日本経済を刺激するためオーバーナイトレートを「可能な限り」引き下げると宣言したのだ。このとき日本はデフレスパイラルの淵にたっていると考えられた。この発表に続いて日本銀行は

The BOJ's "zero interest rate policy" has revived the interest of researchers in the zerobound on nominal interest rates, and a number of studies have recently investigated this issue.Krugman (1998, 2000) argues that the natural rate of interest in Japan is negative, so thatthe real interest rate, which is zero or slightly positive, is still higher than the natural rate ofinterest. Based on this diagnosis, he recommends that the BOJ should raise the expected rateof inflation by announcing that it will never stick to price stability but instead will conduct"irresponsible" monetary policy in the future. On the other hand, Woodford (1999c) andReifschneider and Williams (2000) put less emphasis on expected inflation, focusing instead onlong-term nominal interest rates. Woodford (1999c) points out that, even when the currentovernight interest rate is close to zero, the long-term nominal interest rate could be well abovezero if future overnight rates are expected to be well above zero. Expectations theory of the term structure of interest rates implies that, in this situation, a central bank could lower thelong-term nominal interest rate by committing itself to an expansionary monetary policy inthe future, thereby stimulating aggregate demand. The argument for lowering the long-termnominal interest rate has also been a popular one in the policy debate in Japan, where the10-year JGB rate was well above two percent when the zero interest rate policy was initiated in February 1999.

An important element commonly contained in the above policy recommendations is thata central bank, when caught by a liquidity trap, should make a credible commitment to anexpansionary monetary policy in the future. Under the assumption that the central bank'spolicy instrument is the short-term nominal interest rate rather than quantitative measures,as is currently the case in most industrialized countries, this means that a central bank must commit itself to keeping a zero interest rate policy for some time. More specifically, a central bank needs to specify and announce a contingency plan describing how long a zero interest ratepolicy would be continued, i.e., when and under what circumstances a zero interest rate policywould be terminated.

This was exactly the issue the BOJ policy board had been discussing since the introductionof the zero interest rate policy. In the early stages of the policy, there was a perception inthe money markets that such an unusual policy would not be continued for long. Reflectingthis perception, implied forward interest rates for at least six months started to rise in earlyMarch, two months after the introduction of the policy, although implied forward rates for lessthan six months remained at very low levels. This was clearly against the BOJ's expectation that the zero overnight call rate would spread to longer-term nominal interest rates. Forced tomake the bank's policy intention clearer, Governor Hayami announced on April 13, 1999 thatthe monetary policy board would keep the overnight interest rate at zero until "deflationaryconcerns are dispelled".3Some researchers and practitioners argue that this announcementhas had the effect of lowering longer-term interest rates by altering the expectations of marketparticipants (See, for example, Taylor (2000)).

The objective of this paper is to characterize the contingency plan; in particular, we are interested in when and under what circumstances a central bank should terminate a zero interestrate policy. For this purpose, we solve a central bank's intertemporal loss-minimization problem,in which the non-negativity constraint on nominal interest rates is explicitly considered. Given an adverse shock to the natural rate of interest, we compute the optimal path of short-termnominal interest rates under the assumption that a central bank has the ability to make acredible commitment about the future course of monetary policy.The rest of the paper is organized as follows. Section 2 presents a central bank's intertem-poral loss-minimization problem. Sections 3 and 4 characterize discretionary and commitmentsolutions to the problem. Section 5 gives a numerical example. Section 6 concludes the paper.

6. Conclusion

What should a central bank do when it faces a weak aggregate demand even after lowering theshort-term nominal interest rate to zero? To address this question, we have solved a centralbank's intertemporal loss-minimization problem, in which the non-negativity constraint onnominal interest rates is explicitly considered. Given an adverse shock to aggregate demand,we have computed the optimal path of short-term nominal interest rates under the assumptionthat the central bank has the ability to make a credible commitment about the future courseof monetary policy. We have found that the optimal path is characterized by monetary policyinertia, in the sense that a zero interest rate policy is continued for a while even after thenatural rate of interest returns to a positive level.