Sunday, March 17, 2013

Old and New Keynesian Economics and Abenomics, or: Does the Phillips Curve of Japan Look Like Japan?

Flipped around, of course, and with the kink at the zero inflation rate level.  That is what some Abenomics supporters appear to believe in the new drive to push the Japanese economy from its current deflationary state into an inflationary one, and both Old and New Keynesian models seem to support this, although the OK view thinks that the PC is downwardly sloping in the longer run, while the NK view seems to go with the PC going vertical once Japan gets into positive inflation territory, or, more specifically, a clear yes to the full question.

These are my thoughts on discussing the matter with various folks and listening to some papers at the 17th conference of the Japan Association for Evolutionary Economics at Chuo University in Tokyo, from which I am planning to return home tomorrow.  A leading voice for the OK view is Toichiro Asada, incoming prez of the association and an old associate of the Bielefeld School of macroeconomics, which includes such people as Peter Flaschel, Carl Chiarella, Reiner Franke, Willi Semmler, and some others, most of whom only visit Bielefeld from time to time.  They are arguably somewhat Post Keynesian, but they mostly eschew that label, being more mathematical than most PKs, and Asada is calling himself here and now an Old Keynesian.  Curiously, the loudest advocates of the New Keynesian view at this conference that the Phillips Curve of Japan looks like Japan (flipped around) are some former students of Asada's.

According to Asada, he is the person who changed the mind of Koichi Hamada on this matter.  Hamada, a former student of Tobin's, is now Emeritus at Yale and was also at the Univerity of Tokyo.  He is now the top economic adviser of new Japan Prime Minister, Shinzo Abe, and reputedly the person who convinced Abe to adopt "Abenomics," although Asada claims it should be named for him or Hamada, with Asada now on Japanese TV pushing it.  He and quite a few others are enthusiastic, with Abenomics supporter and Hamada associate, Haruhiko Kuroda, taking over the Bank of Japan on March 20.  Even the NKs support it, although they are worrried about shutting it off sooner than the OKs such as Asada once the inflation rate goes positive (if it does). 

Asada also says that there is really no difference between Abenomics and "Bernankenomics."  In the end in both Japan and the US, the debate gets down to when to pull back from the policy rather than whether to do it or not.


Unknown said...
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Unknown said...

Dear Barkley,

Thank you for your posting. I have a correction. I did not say that "I changed the mind of Koichi Hamada on this matter". I am a follower of Hamadanomics and ont other way round. I'd like to add that Kikuo Iwata, who is one of the most important keypersons like Hamada, became a vice governer of the Bank of Japan.

Toichiro Asada, Tokyo, Japan said...

Thank you for the correction and the addition, Asada-san.