This paper tries to explain large exchange rate swings and persistent balance of payments imbalances among major countries in the 1980s. With a simple two-country model, we illustrate that the behavior of the real exchange rate and the current account depends importantly on the degree of...

For risk control purposes, the foreign exchange position of banks is often divided into two: the dealing position and the structural position. This paper analyzes the reasons for such a separation and demonstrates that the claims and obligations that are treated as structural have different risk...

The Japanese economy faces a number of difficult economic problems to solve; declining working-age population, long-term deflation, monetary policy with zero-interest rate floor, and a large budget deficit. In this paper, we propose a few macro-economic measures to raise taxes without hurting the...

This book looks at the key issues and lessons that policymakers must consider in designing an adequate framework for dealing with financial crises. These include structural problems and their causes, policy actions, the role of market discipline, and preemptive strategies.

The traditional interest rate policy has lost its potency due to the zero-lower bound of nominal interest rates and the gradual accelerating deflation in Japan. Without stopping deflation, the Japanese government may face a rapid erosion of credit worthiness due to an uncontrolled budget...