In many countries, the monetary policy instrument sometimes remains unchanged for a long period and shows infrequent responses to exogenous shocks. The purpose of this paper is to provide a new explanation on why the central bank's policy instrument remains unchanged. In the analysis, we explore...

The Japanese economy experienced prolonged recessions during the 1990s and the 2000s. Until the early 2000s, evergreen lending to "zombie" firms had distorted market discipline in terms of stabilizing the Japanese economy. Even though a majority of the zombie firms eventually recovered during...