Inflation Targeting and Monetary Policy Operation under Price Stability after Financial Deregulation

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Many countries, which had deregulated the financial sectors, experienced the asset price fluctuations and the banking crisis. Many countries achieved lowering and stabilizing inflation, in almost the same periods. Except for the U.S. and Japan, most of those countries have adopted the inflation targeting as the framework for their monetary policy operation. Under the inflation targeting, information disclosure on the policy decision has often been promoted. Even the countries without the inflation targeting have started to release more policy information recently. The philosophy of the monetary policy operation has been transformed. The information disclosure which enhances the forecastability of the future policy actions, is considered to improve the macroeconomic performance. The main findings of this research projects are the followings.(1) The U.S. has overcome the financial crisis in the late 1980s and the early 1990s and succeeded in stabilizing the inflation at low level. We can find the significant asymmetry between the monetary expansion and restraint process in the implementation of the "zero real rate" policy in that period.(2) The information disclosure was promoted in that period in the U.S., but its effects are rather mixed.(3) Looking at the macro policy mix, the Japanese monetary and fiscal policies were not expansionary at the same time until the 1997-98 financial crisis.(4) The Bank of Japan seems to have some information advantages on the macroeconomic forecasts compared with the private think-tanks.(5) The less uncertainty on the monetary policy rules improves the macroeconomic performance in the forward-looking models.