BoJ paper on deflationary traps

This Bank of Japan discussion paper provides a theoretical overview of monetary and fiscal policy with the potential to engineer an exit from a deflationary trap, which the author defines as sustained deflation in the presence of zero interest rates.

The paper finds that the required policy steps are an interest rate hike, a commitment to future currency growth, and a money-financed tax cut. The amount of tax cut required is equal to the increase in the central bank's payments to the treasury

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