تجارت پایاپای تورم نهاده ها در نرخ تورم نزدیک به صفر

The purpose of this paper is to provide new evidence about the cost of near-zero inflation using Japanese data. We test the hypothesis that the short-run Phillips curve becomes flatter as the rate of inflation approaches zero. In implementing the test, we pay special attention to how to control for other factors affecting the rate of inflation. First, we use the skewness of the distribution of relative-price changes as a measure of supply shocks. Second, we use information contained in the cross-prefecture Phillips curve to control for changes in the expected rate of inflation. Through a series of empirical analyses, we find evidences consistent with the hypothesis. In particular, we find that the estimated slope in the 1990s is smaller than before. J. Japan. Int. Econ., December 2000, 14(4), pp. 304–326. Research and Statistics Department, Bank of Japan and Institute of Economic Research, Hitotsubashi University. Copyright 2000 Academic Press.

The Japanese economy has been experiencing disinflation since the beginning of the 1990s when the bubble in stock and land prices burst. For example, yearto- year inflation rates measured by the Consumer Price Index have been gradually declining since the first quarter of 1991. CPI inflation rates were negative in the second and third quarters of 1995, and were in the narrow range of 0 to 1%in 1996 and 1997.2 More recently, year-to-year CPI inflation rates have been negative since the third quarter of 1998. In addition, the rate of wage inflation has been negative since early 1998. Looking back at themovements of the Japanese CPI inflation rates in the postwar period, we find that near-zero inflation rates are a very rare phenomenon. During only three years were the inflation rates negative, namely 1950, 1955, and 1958. For these three years, however, itwas commonly observed that inflation rates increased again soon after they recorded negative values. The present situation is different from these instances in that inflation rates have been staying at a near-zero level for about five years and there are no indications of it increasing. Moreover, it is difficult to find a comparable example in the experiences of other industrial countries during the postwar period. For example, the German economy experienced negative rates of inflation at the final stage of the hyperinflation, but it was just a one-year event.3 Researchers often point out that the Japanese inflation rates are too low. Their argument is based on the following cost–benefit analysis of low inflation.4 That is, it is no doubt that high inflation, say 100% a year, deteriorates the national welfare. In such a situation, a reduction in the rate of inflation to, say 10%, would significantly improve the national welfare. However, applying the same argument to the case of reducing inflation from 3% to zero is misleading. This is because the marginal benefit of reducing inflation is decreasing as the starting rate of inflation becomes lower. For instance, the shoe-leather costs in an economy with 3% inflation are negligible and significant reductions cannot be expected, even if the inflation rate were reduced to zero. On the other hand, there is enough reason to believe that the marginal cost of disinflation increases as the starting rate of inflation becomes lower. For example, if downward rigidity in nominal wages exists, the slope of the short-run Phillips curve becomes smaller as the inflation rate approaches zero. Combining the two, the marginal cost of reducing inflation exceeds the marginal benefit at some positive rate of inflation, and therefore,near-zero inflation is notworth pursuing.5 The above argument is not easy to accept by central bank officials with strong beliefs that the price stability is, by definition, zero inflation.6 Moreover, the discussion continues about whether zero inflation is worth pursuing or not.7 In many empirical studies, it is interesting that the cost and benefit of nearzero inflation is attempted to be measured without using data obtained from the economy when near-zero inflation exists. Some relationship between inflation and other variables is sought using the data of high- or medium-inflation periods, from which it is inferred whatwould happen if the inflation rate approaches zero.8 Given that industrial countries except Japan have never experienced periods of near-zero inflation, such an approach is inevitable but not recommended. The purpose of this paper is to provide new information about the cost and benefit of zero inflation using Japanese data from 1970 to 1997. The 1990s is not a shining period for the Japanese economy, but it might be a very important period from the viewpoint of constructing a data set suitable for the cost–benefit analysis of zero inflation. Our interest in this paper is in the costs of disinflation at near-zero inflation. More specifically, we are interested in whether the relationship between the rate of inflation and the slackness of the economy, the short-run Phillips curve, depends on the level of inflation rates.Wewould like to test the hypothesis that the short-run Phillips curve becomes flatter as the rate of inflation approaches zero. Figure 1 compares the sacrifice ratio, defined by the cumulative deviation of real GDP from trend divided by the cumulative declines in CPI inflation, in three periods of disinflation: mid-1970s, early 1980s, and 1990s. The sacrifice ratio of the 1990s is clearly much larger than the ratios of the other two periods. This evidence is consistent with the above hypothesis that the short-run Phillips curve becomes flatter as the rate of inflation approaches zero, but how strongly does this support the hypothesis? One of the most important procedures in implementing the above test is to properly control for other factors affecting the rate of inflation. For example, the fluctuations of oil prices must be controlled for. Another example is an increase in the Japanese imports of labor-intensive products from the east-Asian economies in the first half of the 1990s. Inflow of these goods led to a change in their relative prices in the Japanese markets and, consequently, to a decline in the Japanese CPI inflation rates. These are the examples of supply shocks that should be controlled for when estimating the Phillips curve. In previous studies, particularly those on the Japanese economy,9 researchers have used import-price inflation as a proxy for supply shocks. Import-price inflation is a good proxy for supply shocks if they come from foreign economies, but fails to work properly when shocks originate domestically. For example, some researchers point out that the inflow of laborintensive products has improved the productivity of Japanese firms through price competition with the east-Asian firms, thereby contributing to disinflation in the mid-1990s. This type of supply shock is hard to detect as long as we use importprice inflation. In this paper, following the proposal by Ball and Mankiw (1995), we use the skewness of the distribution of relative price changes as an alternative measure of supply shocks. Changes in the expected rate of inflation are also an important factor causing shifts in the short-run Phillips curve. Given the lack of an explicit measure for expected inflation, however, it is hard to control for this directly. Our empirical strategy for this problem is to use a panel data set of inflation rates and active opening rates. The latter rate is defined as the ratio of job offers to applicants, which is observed for 46 prefectures from 1971 to 1997. First, we transform the observed values of these two rates by subtracting the appropriate national averages.In this way, we remove the effects of nationwide shocks, which include changes in expectations about the future course of monetary policy conducted by the central bank. By using the transformed panel data, the estimated slope of the short-run Phillips curve should be free from any bias caused by uncontrolled nationwide disturbances. The rest of the paper is organized as follows: Section 2 provides brief overviews of theories and empirical evidences about the relationship between the slope of the short-run Phillips curve and the level of inflation rates. Sections 3 and 4 explain the data and our empirical strategy. Section 5 shows the results of the empirical investigation. Using data on the CPI and wage inflation rates, as well as active opening rates, we find that the slope of the short-run Phillips curve becomes flatter as the rate of inflation approaches zero. This relationship holds even when we control for supply shocks and expected inflation. Section 6 presents our conclusion.

In this paper, we tested the hypothesis that the slope of the short-run Phillips curve becomes flatter as the rate of inflation approaches zero. The regression analysis using the aggregated time-series data revealed that the Japanese data are consistent with the hypothesis and that the short-run Phillips curve kinks somewhere around 3%. The analysis using the transformed panel data also provided evidence consistent with the hypothesis, but less conclusive because the slope of the short-run Phillips curve is imprecisely estimated. To conclude the paper, we comment on the implications of a flatter short-run Phillips curve under low or near-zero inflation. First, our results provide additional evidence for the argument that central banks should aim at a positive, rather than a zero, rate of inflation. In interpreting this result, however, it should be kept in mind that economic systems evolve over time and reflect changes in their environments. In our context, this means that a smaller slope of the short-run Phillips curve at near-zero inflation rates might be a transitory phenomenon. Put differently, we cannot deny the possibility that the slope rises as the economic agents become accustomed to near-zero inflation rates. For example, the degree of downward rigidity of nominal wages is not independent from macroeconomic conditions, including the inflation rate. In this respect, recent movements toward the adoption of a new type of wage contracts, in which salaries of workers are determined reflecting their productivities, might be noteworthy. The spread of this type of wage contracts will surely enhance the flexibility of nominal wages, thereby weakening the nonlinearity of the short-run Phillips curve at near-zero inflation. Second, central banks find it difficult to conduct monetary policy, particularly fine-tuning policy, if they are watching only inflation rates. This is an immediate implication of a flatter short-run Phillips curve at near-zero inflation rates. To illustrate this, suppose an economy is hit by a negative demand disturbance that decreases nominal GDP. In a world with high inflation, where the short-run Phillips curve is steep, the consequence of a negative demand disturbance shows up as reduced inflation, having almost no effect on real GDP. On the other hand, in an economy with low inflation, where the short-run Phillips curve is flat, the consequence appears as a reduction in real GDP, having almost no effect on inflation rates (at least in the short run). An important point is that the rate of inflation is a sensitive variable in an economy with high inflation but not in one with low inflation. In other words, the inflation rate is not very informative in an economy with low inflation.22 Thus, it is dangerous if there is a heavy weight on inflation rates in the policy response function of a central bank in a low-inflation economy.23