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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.
- Summer '13