The difference between these two sets of figures

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Unformatted text preview: uld do in the first half of the twenty-first century. The effects were favourable then, both at home and overseas, and would be favourable now. To achieve this requires a substantially lower real exchange rate, one that should be close to the level generated by purchasing power parity (PPP). Present estimates suggest that the PPP rate may lie anywhere between 125 and 160 yen to the dollar (McKinnon and Ohno, 1999; OECD, 1999). In the first half of 2000, the spot rate has oscillated between 100 and 110. The difference between these two sets of figures illustrates the magnitude of the task. Not only would Japan need to engage in an aggressive monetary expansion, as suggested by Krugman (1998), it would also need to ensure agreement from other countries, and especially the United States, that its depreciation would be accepted, in line with the McKinnon–Ohno recommendation. As argued in section III, given the views of the Bank of Japan about monetary profligacy, and those of the US authori...
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This note was uploaded on 02/03/2014 for the course ECON 204 taught by Professor Devero during the Summer '13 term at American University of Sharjah.

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