11IMES Newsletter
June 2017
The Institute for MonetaryandEconomicStudies(IMES) was founded in 1982
as an internal organ of theBankofJapan,inofthecentennial.

Thecommemoration
Bank’s

IMES conducts a wide rangeof studies on the theoretical,
institutional, and historicalaspects of monetary andeconomic issues. The IMES
also collects, conserves, andexhibits historical materials
related to monetary andeconomic issues.
Highlight of This Issue

2017 BOJ-IMES ConferenceOpening remarks



Mayekawa Lecture

Keynote speechPolicy panel discussion

The IMES Newsletter aims
to provide information about
the IMES’ activities andmajor events held by theIMES on a timely basis.

2017 BOJ-IMES Conference
The Institute for Monetary and Economic Studies (IMES) of theBank of Japan (BOJ) held the 2017 BOJ-IMES Conference, titled“Monetary Policy: Lessons Learned and Challenges Ahead,” onMay 24–25, 2017 at the BOJ Head Office in Tokyo.
The conference attracted about ninety participants from academia,
central banks, and international organizations. They discussed
lessons learned from past experience with unconventional monetarypolicies and clarified challenges in the future.
The conference began with theopening remarks delivered by BOJ
Governor Haruhiko Kuroda. In hisopening remarks, he raised threemajor research topics at thefrontier of monetary economics
and monetary policy making: (i)inflation and its expectations
dynamics; (ii) the declining trendof the natural rate of interest; andGovernor
Haruhiko(iii)
heterogeneous
agent BOJ
macroeconomics and distributional Kuroda delivers his opening
remarks (Photo: Shoichi Nose).
effects of monetary policy.
Thereafter,
Thereafter, referring to the words of Professor Maurice Obstfeld,*“[the BOJ-IMES Conference is] a venue in which abstract monetary
theory and practical policy questions can comfortably be discussed* Currently Chief Economist of the International Monetary Fund, and a former
Honorary Adviser at the IMES.
IMES Newsletter June 2017

2in full depth and side byside,” Governor Kuroda
expressed his hope that
this year’s conference
would produce furtherinsights
into
more
effective central bankpolicymaking
asinprevious conferences.
Conference participants (Photo: Shoichi Nose)In the Mayekawa Lecture, Dr. Ben S. Bernanke(The Brookings Institution) reviewed his past advice
on the BOJ’s monetary policy management to see how
it had stood the test of time. He then reaffirmed theimportance of the BOJ’s continued pursuit of its two
percent inflation goal. Considering some features ofthe Japanese economy that made reaching the Bank’s
inflation target difficult even under the very aggressive
policies, he also discussed a more explicit coordinationof monetary and fiscal policies as one of thecontingency options in case a tremendous adverse
shock hit the economy.

Professor Mark Gertler (New YorkUniversity, Honorary Adviser at theIMES) delivers the keynote speech.

Dr. Ben S. Bernanke (The Brookings
Institution) delivers the Mayekawa
Lecture (Photo: Shoichi Nose).

In the keynote speech, Professor Mark Gertler (NewYork University, Honorary Adviser at the IMES) argued
that the process of reflation from a liquidity trap hadtaken much longer than expected even withstate-of-the-art monetary policy since Governor Kuroda
was appointed in March 2013. He also pointed that byintroducing hybrid adaptive/rational expectations
formation, the theoretical model could produce slow
reflation. He concluded that because of the absence ofhistory of inflation anchored by the target, individuals
needed to see some inflation to believe it and that thebest course was to continue aggressive monetary policy.
IMES Newsletter June 2017

3Panelists and a moderator (from left): Director-General Economics Frank Smets (European Central Bank,panelist), Deputy Governor Hiroshi Nakaso (BOJ, panelist), and President and Chief Executive Officer
Charles L. Evans (Federal Reserve Bank of Chicago, panelist), and Professor Marvin Goodfriend(Carnegie Mellon University, Honorary Adviser at the IMES, moderator)

The policy panel discussion, moderated byProfessor Marvin Goodfriend (CarnegieMellon University, Honorary Adviser at theIMES), had three panelists: President andChief Executive Officer Charles L. Evans(Federal Reserve Bank of Chicago), DirectorGeneral Economics Frank Smets (EuropeanCentral Bank), and Deputy Governor Hiroshi
Nakaso (BOJ). They presented their recent
experience with unconventional monetary
policies and discussed lessons learned andchallenges ahead.
Deputy Governor Nakaso touched on thelessons learned from the BOJ’s monetary
policy since 2013: from “Quantitative andQualitative Monetary Easing (QQE)” to “QQEwith Yield Curve Control.” He took up threechallenges ahead and suggested that weshould deepen our understanding of: (i) how
to raise inflation expectations that fell once toan undesirably low level, (ii) optimal levels

and shapes of the yield curve, and (iii) theinfluence of yield curve control on market
functioning.
President Evans discussed three lessons
from the aftermath of the Global Financial
Crisis. The first was that outcome-based
policies, including forward guidance, became
even more critical during crises. The second
was that a symmetric inflation target was achallenging objective for a conservative
central bank. The third was that, given the riskof facing the zero lower bound, the risk
management perspective would provide a keybasis for policy decision-making in theforeseeable future.
Director-General Smets described theEuropean Central Bank’s overall strategy of
implementing multi-dimensional instruments
after the crisis. He exemplified that thevarious instruments, reinforcing each other,had been able to activate different channels,
IMES Newsletter June 2017

4and concluded that multi-dimensionality wasparticularly important in a partially segmented
interbank market.
In the paper presentation sessions, fourpapers, related to the three topics raised byGovernor Kuroda’s opening remarks, werepresented by professors and central bankeconomists and discussed by conference
participants.
At the first session Dr Jeffrey C Fuhrer
Professor Kenneth D. West (University ofWisconsin-Madison, left) presents his paper,“Some Evidence on Secular Drivers of U.S. Safe
Real Interest Rates.” Dr. Piti Disyatat (Bank ofThailand, right) makes his comments.

Dr. Jeffrey C. Fuhrer (Federal Reserve Bank ofBoston, left) presents his paper, “Japanese andU.S. Inflation Dynamics in the 21st Century.”
Professor Mototsugu Shintani (University ofTokyo, right) makes his comments.

Dr. Ryo Kato (BOJ, left) presents his paper,“Market Concentration and Sectoral Inflation
under Imperfect Common Knowledge.” Dr. John
McDermott (Reserve Bank of New Zealand, right)
makes his comments.

Professor Benjamin Moll (Princeton University,left) presents his paper, “Monetary Policy
According to Heterogeneous Agent New
Keynesian (HANK) Models.” Mr. Boris Cournède(Organisation for Economic Co-operation andDevelopment, right) makes his comments.
IMES Newsletter June 2017

5Recent Publications from the IMES

IMES Discussion Paper SeriesNo. 2017-E-3“Guiding the Economy Toward the Target Inflation Rate: An Evolutionary Game
Theory Approach” by Yasushi Asako and Tatsushi Okuda, May 2017

No. 2017-E-2“Banking Crises and the Japanese Legal Framework” by Ignacio Tirado, Mar. 2017

No. 2017-E-1“Term Structure Models with Negative Interest Rates” by Yoichi Ueno, Mar. 2017

No. 2016-E-13“Market Liquidity and Systemic Risk in Government Bond Markets: A Network
Analysis and Agent-Based Model Approach” by Toshiyuki Sakiyama and Tetsuya
Yamada, Oct. 2016

No. 2016-E-12“Quantitative Easing and Liquidity in the Japanese Government Bond Market” byKentaro Iwatsubo and Tomoki Taishi, Oct. 2016

No. 2016-E-11“Durations at the Zero Lower Bound” by Richard Dennis, Aug. 2016

No. 2016-E-10“Sustainable International Monetary Policy Cooperation” by Ippei Fujiwara, TimothyKam, and Takeki Sunakawa, Aug. 2016

No. 2016-E-9“Simultaneous Estimation of Cost of Equity and Expected Earnings of Individual Firms
with the Residual Income Model” by Tetsuya Adachi, Takashi Asano, and Tatsushi
Okuda, Aug. 2016

Monetary and Economic Studies Vol.34 / November 2016
“Simultaneous Estimation of Cost of Equity and Expected Earnings of Individual Firms with theResidual Income Model” by Tetsuya Adachi, Takashi Asano, and Tatsushi Okuda

“Upstreamness in the Global Value Chain: Manufacturing and Services” by Kenji Suganuma

“The Intraday Market Liquidity of Japanese Government Bond Futures” by Naoshi Tsuchida,Toshiaki Watanabe, and Toshinao Yoshiba

IMES Newsletter June 2017
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2-1-1, Nihonbashi-Hongokucho, Chuo-ku, Tokyo 103-8660, Japan
Phone: +81-3-3279-1111
Fax: +81-3-3510-1265
E-mail: imes.journals-info@boj.or.jp
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IMES Newsletter June 2017