With nominal interest rates at zero expectations of deflation raise
With nominal interest rates at zero, expectations of deflation raise the real interest rate. Japan has faced the zero-bound-deflation problem for many years. Plot since 2000 the nominal interest rate on Japanese Treasury bills (FRED code: INTGSTJPM193N), the inflation rate based on the percent change from a year ago of Japan’s consumer price index (FRED code: JPNCPIALLMINMEI), and an estimate of the real interest rate based on the difference between these two indicators. Comment on the risks that deflation poses in an economy with a zero nominal interest rates.

Membership TRY NOW
  • Access to 800,000+ Textbook Solutions
  • Ask any question from 24/7 available
    Tutors
  • Live Video Consultation with Tutors
  • 50,000+ Answers by Tutors
OR
Relevant Tutors available to help