Monetary and Fiscal Policies under Very Low Interest Rate and Government Debt Accumulation

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Our perspective from the fiscal policy rule shows that the deterioration of fiscal balance after the 2008 global financial crisis reduces the effects of monetary policy in Japan. Our theoretical analysis on the relationship between fiscal policy and currency crisis verifies that the Argentine currency crisis in 2001 was caused by the violation of budget constraint of public sector. Our perspective from the monetary policy rule verifies that the imperfect capital mobility among the nations caused by serious financial crisis tends to prolong the duration of zero interest rate policy as an optimal monetary policy rule.