تنظیم نرخ ارز، سیاست های پولی و محرک های مالی درگریز ژاپن از رکود بزرگ

A veteran finance minister, Takahashi Korekiyo, brought an early recovery for Japan from the Great Depression of the 1930s by prescribing a combination of expansionary fiscal, exchange rate, and monetary policies. To explore the comprehensive transmission mechanism of Takahashi's macroeconomic policy package, including the expectation channel, we construct a structural vector auto-regression (S-VAR) model with three state variables (output, price, and the inflation expectations) and three policy variables (fiscal balance, exchange rate, and money stock). Our analysis reveals that the exchange rate adjustment undertaken as an independent policy tool had the strongest effect, and that changes in people's expectations played a significant role for escaping from the Great Depression. During the second half of 1931, in particular, speculation on Japan's departure from the gold standard and the inflation that was likely to follow reversed the existing expectations: instead of expecting deflation, people began to expect inflation, months ahead of the actual departure from the gold standard. As a whole, the choice of the level of the exchange rate was crucial for changing people's expectations as well as promoting exports.

In the wake of the recent global economic turmoil, policymakers and economists around the world focus on the experiences during the Great Depression in the 1930s to learn lessons from them. In this respect, the Japanese economy in this period draws renewed attention as a canonical case of successful policy to bring an early recovery in the midst of the global depression. After two years of double-digit deflation in 1930 and 1931, Japan escaped from the deflationary trend in 1932. Over the next five years, it went on to experience robust economic growth and mild inflation, even as depression persisted in many other parts of the world.1 Korekiyo Takahashi, a veteran finance minister, brought about an early recovery for Japan, during his fifth, sixth and seventh terms as finance minister, by prescribing a combination of expansionary exchange rate, fiscal, and monetary policies between December 1931 and February 1936. Right after his return as minister, Takahashi moved Japan off the gold standard to depreciate the yen. Over the next few years, he prescribed fiscal stimulus and an easy monetary policy.2 Takahashi's policy has drawn attention from economic historians, economists, and policymakers from around the world. Ben Bernanke, among others, has spoken highly of Takahashi's accomplishments: “Finance Minister Korekiyo Takahashi brilliantly rescued Japan from the Great Depression through reflationary policies in the early 1930s.”3 While most economic historians agree that Takahashi's policy package stimulated the Japanese economy as a whole, they do not agree on which parts of the package were more effective and which parts were less effective.4 Some argue that Japan's early economic recovery can mainly be credited to the depreciation of the yen.5 Others claim that the key was fiscal stimulus.6 Others still are convinced that the easy monetary policy kick-started the recovery. Some emphasize the impact of the Keynesian path in creating effective demand, whereas others stress the central role of the expectations of price changes in the future. Observing data in Japan's interwar period, we notice that Takahashi pursued a policy package of increasing fiscal deficit, depreciating the currency, and expanding the money stock during his term. We now know little, however, of the dynamics of the policy shifts. Which parts of the policy package were crucial for Japan's recovery from the Great Depression? What kind of policy shift brought about the changes in output? Which parts of the package were deliberate policy actions and which were reactions to changes in the economy or the influence of other policy changes? To disentangle the various possible directions of causality, we need to identify and measure the exogenous and endogenous components of each macroeconomic variable in a systematic way. A structural vector autoregressive (S-VAR) methodology is useful for this purpose. Cha (2003) introduces a S-VAR analysis to capture the magnitude of respective policy effects in Japan during this period. He uses the S-VAR model with monthly data on world output, the real effective exchange rate, the real government deficit, high-powered money, the volume of railway freight (as a proxy for aggregate real output), and real wages for the period of January 1929 to September 1936 (93 months). He concludes that fiscal expansion stands out as the single most important cause of Japan's upswing in the early 1930s. Recent macroeconomic policy debates shed new light on the role of expectations as the key element when escaping from a severe economic downturn. A number of studies explore the experience during the Great Depression to derive policy lessons. After the seminal works by Temin (1989) and Eichengreen (1992), the departure from the gold standard was regarded crucial for the economic recovery of the 1930s.7Temin and Wigmore (1990) argue that, in the United States, a “regime change” associated with the departure from the gold standard in 1933 was crucial in order to change people's expectations and behavioral patterns.8Romer (1992) states that the departure from the gold standard enabled monetary expansion which brought recovery.9Hsieh and Romer (2006) find that a large, but short-lived, monetary expansion in 1932 did not raise expectations for devaluation of the dollar because investors had no doubt about the Fed's commitment to maintaining the gold standard. They argue that the Fed was not constrained by the gold standard, but that the Fed refrained from a decisive monetary expansion because it adhered to the gold standard philosophy.10Eggertsson (2008) suggests that the elimination of policy dogmas of the gold standard, a balanced budget, and a small government generated an endogenous shift in expectations about future macroeconomic policies such that, rather than expecting contractionary macroeconomic policies, people expected expansionary policies, which triggered the recovery from the Great Depression.11 In Europe, Crafts (2011) claims that the British government changed people's inflation expectations by abandoning the fixed exchange rate, gaining control over its monetary policy, and making interest rate reduction possible.12Berg and Jonung (1999) argue that Sweden in the 1930s was the pioneering case of price level targeting by which the monetary authorities succeeded in turning people's expectations from deflation to inflation.13Strauman and Woitek (2009) challenge the view of Berg and Jonung.14 Strauman and Woitek claim that Swedish monetary authorities intended to stabilize its exchange rate vis-a-vis the pound-sterling and followed British monetary policy both before and after the departure from the gold standard in 1931. In Japan, some economists argue that Takahashi's decisive monetary policy rescued Japan from the Great Depression by reversing people's expectations from deflation to inflation.15 However, the transmission mechanism of macroeconomic policy tools including the “expectation channel” has been under-explored so far. This paper is the first attempt to draw an overall picture of the transmission mechanism of macroeconomic policy tools of fiscal, exchange rate and monetary policies in a national economy during the Great Depression, incorporating the role of expectations as well as the policy tools. To do so, we construct a S-VAR model with three state variables (output, price, and inflation expectations) and three policy variables (fiscal balance, exchange rate, and money stock). Several novel features of our analysis set this study apart from the existing literature. Our VAR allows us to incorporate the variables underlying the explanations of Japan's recovery from the Great Depression into a single empirical model. In this regard, the only precedent for our analysis is Cha's S-VAR analysis of macroeconomic policy. We expand and deepen Cha's analysis by integrating an inflation expectation variable into the model, quantifying effects of each policy measures, and extending the sample period. First, we incorporate a direct measure of the public's inflation expectations extracted from commodity future prices into the VAR. This approach helps us identify exogenous movements in inflation expectations, which in turn allows us to study the role of expectations in the business cycles during the interwar period. Second, we quantify impacts of the policy measures. We express the impacts on output using the relevant impulse response functions, which Cha uses, too. In addition, we examine the historical role of each policy measure employing econometric methodologies such as the historical decomposition analysis of past movements in macroeconomic variables and the counter-factual simulation analysis. Third, the sample in our analysis is relatively large compared with the samples in previous studies, which allows us to make more precise estimations. Our analysis sheds new light on the conduct of macroeconomic policy not only in Japan during the Great Depression, but also in other parts of the world and/or during different periods. It demonstrates that exchange rate adjustment undertaken as an independent policy tool played the most important role in recovery from the depression and that expectations played a pivotal role in dynamics at work. During the second half of 1931, in particular, speculation on Japan's departure from the gold standard and the inflation likely to follow reversed expectations: instead of expecting deflation, people began to expect inflation, months ahead of the actual departure from the gold standard, which occurred in December of that year. Monetary policy was effective, but was not conducted as an independent policy device. Rather, it accommodated changes in economic policy measures such as exchange rate settings. The effects of fiscal policy were limited. As a whole, the choice of the level of the exchange rate was crucial for changing people's expectations as well as promoting exports and raising domestic prices. The rest of this paper proceeds as follows. Section 2 describes the econometric methodology and our data. Section 3 presents the empirical results. Section 4 discusses our findings in relation to anecdotal evidence and previous studies. Section 5 concludes the paper.

We draw an overall picture of the transmission mechanism of macroeconomic policy tools of fiscal, exchange rate and monetary policies in Japan during the Great Depression in the 1930s, incorporating the role of expectations as well as all the policy tools. Our S-VAR analysis reveals that exchange rate adjustment undertaken as an independent policy tool played the most important role in recovery from the depression, and that inflation expectations played a pivotal role in the dynamics at work. During the second half of 1931, in particular, speculation on Japan's departure from the gold standard and the inflation likely to follow reversed expectations: instead of expecting deflation, people began to expect inflation, months ahead of the actual departure from the gold standard, which occurred in December of that year. Monetary policy was effective, but was not conducted as an independent policy device. Rather, it accommodated changes in economic conditions and other macroeconomic policy measures such as exchange rate settings. The effects of fiscal policy were limited. As a whole, the choice of the level of the exchange rate was crucial for escaping from the Great Depression, by changing people's expectations as well as promoting exports and raising domestic prices. People already had expected a “regime change” and recovery months ahead of Takahashi's return to power; what Takahashi did was to realize the outcome in a prompt and orderly manner as people had expected. Japan in the 1930s was a canonical case for a small open economy escaping from the severe global economic downturn. It brought a “regime change” by the departure from the gold standard. People expected the event well ahead of time and changed their behavior in advance, enhancing policy effects. Our story is consistent with Temin (1989) and Eichengreen (1992), who argue that the departure from the gold standard was crucial for the economic recovery of the 1930s. Our findings show new empirical evidence that inflation expectations played a pivotal role in the dynamics at work.