تورم قیمتی ، تقاضای پول ، و عدم تداوم سیاست های پولی: نمایش مقایسه ای ژاپن، چین، و ایالات متحده

In this paper we review the history of deflation in China, Japan, and the United States, and summarize the stylized empirical facts regarding deflation and key real and monetary variables in these economies. Based on a review of the institutional background of deflation in these economies, we argue that deflation in China is largely supply-led, whereas deflation in Japan is demand-led. We discuss the adverse effects of demand-led deflation, and argue that deflation is not simply inflation in reverse. Based on these adverse effects, we explain the basis of a discontinuity in the monetary policy process, and contrast the discontinuity process with the 1930s-era liquidity trap concept. We then provide empirical evidence on an important link in the discontinuity process: the effect of demand-led deflation on money demand. We consider a variety of money demand function estimates for Japan, China, and the United States in order to illustrate that deflation in Japan may have indeed contributed to a discontinuity in monetary policy by shifting the demand for money upward, and we then suggest several implications for central bank policy in a deflationary environment.

Price deflation has characterized both China and Japan in recent years, and deflation was a prominent characteristic of the economic and financial distress experienced by the United States during the 1930s. While the deflation experience of China and Japan since the mid-1990s, which we show in Table 1, is on a much smaller scale than the deflation of the 1930s, the fact that deflation has reappeared raises a number of issues and rekindles old debates of the 1930s regarding monetary policy liquidity trapsThe deflation experience of China and Japan is markedly different in terms of its effect on real and monetary variables. China has experienced low inflation and most recently deflation, and yet, real GDP growth has been high, as Fig. 1 demonstrates. In contrast, Japan’s disinflation and deflation process has been associated with stagnant or declining real GDP. Fig. 2 illustrates that nominal interest rates have fallen in China, but remain meaningfully above zero, while Fig. 3 shows that real interest rates have remained at about 2% since 1999. In contrast, growth in Japan has been stagnant (Fig. 1), nominal interest rates have approached zero (Fig. 2), while at the same time real interest rates have increased (Fig. 3). As Fig. 4 shows, the ratios of money supply (both M1 and M2) to GDP (the k ratio) have risen rapidly in China and Japan in the 1990s. The growth of the k ratio in China is probably reflecting rapid income growth more than deflation, while in Japan the growth of the k ratio largely reflects deflation, since income has been stagnant or declining. As Fig. 5 shows, the deposit expansion multipliers for M2 in China and Japan also illustrate divergent behavior in the presence of deflation. 1 China’s M2 multiplier has increased while Japan’s has decreased.For the United States, which we include as a benchmark case because of the general absence of deflation in the postwar period, nominal interest rates have declined in the 1990s due to disinflation, but they remain higher than nominal rates in Japan. Real interest rates since 1999 have averaged about 2%. Furthermore, the k ratio has remained relatively stable and while the M2 multiplier declined in the early 1990s, it has stabilized sine 1996. Thus, there are considerable differences between the recent deflation experiences in China and Japan, and considerable differences with economies where deflation is not present. The objective of this paper is to investigate the differing impacts of deflation in China and Japan, with specific emphasis on the effect of deflation on money demand and its implication for the conduct of monetary policy. This comparative study accepts the view that deflation in China is supply-led, while deflation in Japan is demand-led. Two considerations suggest this to be a reasonable operating assumption. First, deflation in Japan has been associated with low and/or declining real GDP, while deflation in China has been associated with high rates of real GDP growth. Second, there exists considerable empirical and analytical research supporting this assumption that deflation in Japan is induced by monetary policy (e.g., Cargill, Hutchison, & Ito, 2000; Hetzel, 2003, McCallum, 2003 and Posen, 1998). The Bank of Japan, however, has argued that deflation is not the outcome of monetary policy and that monetary policy has been expansionary (e.g., Okina, 1999). Others in the Japanese government have also suggested that nonmonetary forces are behind the deflation (see Noland & Posen, 2002). The consensus view, however, is that deflation in Japan is demand-driven, and has largely been caused by inappropriate monetary policy.2 In contrast, Lin (2000) argues that deflation in China has been the product of over-supply rather than a slowing of aggregate demand. Reforms in the 1990s have generated significant increases in productivity in China, thus contributing to both increasing real GDP and declining prices. Though deflation has many effects, this paper focuses on the differential impact of deflation on money demand. The empirical evidence suggests that the impact on money demand in China has been neutral, while the impact of deflation in Japan has been to shift money demand upward. Combined with other effects of deflation, the upward movement in Japanese money demand contributes to a discontinuity in monetary policy. The remainder of the paper consists of five sections. Section 2 reviews some institutional background of the recent price behavior in China and Japan, with most of the discussion focused on China since deflation in Japan has been widely documented. Section 3 distinguishes between deflation and inflation and argues that, in general, a deflation rate of a specific magnitude has a greater adverse impact on the economy and monetary policy than an inflation rate of the same size. Section 4 outlines the process whereby deflation generates a discontinuity for monetary policy and distinguishes this discontinuity from the 1930s liquidity trap concept. Section 5 presents a range of estimates of money demand in China, Japan, and the United States using both quarterly and annual data. A concluding section summarizes the main points of the paper and draws policy implications for central bank policy.

The empirical results suggest that money demand is influenced by the presence of demand-led deflation. Japan’s demand for money estimates are consistent with the presence of an independent effect by the deflation process that commenced in 1995, though the evidence is not strongly significant. The evidence for Japan is not as dramatic as for the United States in the 1930s, but nonetheless the money demand functions do show sensitivity to deflation. In contrast, the money demand functions for China suggest that deflation has no measurable effect on money demand at any reasonable level of confidence. The difference between China and Japan (and the United States in the 1930s) can be attributed to the fact that deflation in China is supply-led, due to increased competition and productivity, while deflation in Japan is demand-led due to restrictive monetary policy. The resulting differential effect of deflation in China and Japan is also reflected by movements in the real rate of interest and the money multiplier. Japan appears to be experiencing a discontinuity in the monetary policy process. Deflation has been accompanied by slow or declining real GDP, increasing real interest rates, a declining money multiplier, and a tendency for the demand for money to shift upward. The policy implications are obvious. First, central banks should be as concerned, if not more concerned, with deflation than they have been in the past, for small rates of deflation may have a significantly greater impact than equivalently small rates of inflation. Second, once deflation begins, central banks need to pursue aggressive and nontraditional monetary policy to reestablish positive price anticipations by the public. Third, the longer the central bank postpones these actions, the more difficult it will become to reverse the process. This is not the place to discuss the issues of central bank independence/dependence and inflation targeting, but clearly there is a growing recognition that deflation is a serious problem in Japan and may become a serious problem elsewhere (see Federal Reserve System, 2003). This in turn has motivated a discussion that further institutional redesign of central banks along inflation (or price-path) targeting lines, as originally suggested by Simons (1936), may be required to ensure price stability, and prevent deflation as well as inflation.