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The role of preconceived ideas in macroeconomic policy: Japan's experiences in the two deflationary periods

Hamada, Koichi; Noguchi, Asahi

This paper examines the role of misleading economic ideas that most likely promoted the economic disasters of the two deflationary periods in Japanese economic history. Misleading ideas deepened the depression during the interwar years, and erroneous thinking prolonged the stagnation of the Japanese economy since the 1990s. While the current framework of political economy is based on the self-interests of political agents as well as of voters, we highlight the role of misleading ideas in policy making, in particular, in the field of macro-economy where the incidence of a particular policy is not clear to the public. Using two significant examples, this paper illustrates the role of preconceived ideas, in contrast to economic interests, that dominantly influenced economic policy making.

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Academic Units
Center on Japanese Economy and Business
Publisher
Center on Japanese Economy and Business, Graduate School of Business, Columbia University
Series
Center on Japanese Economy and Business Working Papers, 237
Published Here
February 14, 2011
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