REUNIÃO DE CONJUNTURA 05/06/2017. Artigos de Bancos Centrais e BIS

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1 REUNIÃO DE CONJUNTURA 05/06/2017 Artigos de Bancos Centrais e BIS John C. Williams: Risk, Resilience & Sustainable Growth: U.S. Monetary Policy in a Post- Recovery Era... 1 Benoît Cœuré: Greece: progress, challenges and the way forward... 6 Haruhiko Kuroda: Monetary policy - lessons learned and challenges ahead...11

2 John C. Williams: Risk, Resilience & Sustainable Growth: U.S. Monetary Policy in a Post-Recovery Era Remarks by John C. Williams, President and Chief Executive Officer of Federal Reserve Bank of San Francisco, at the Symposium on Asian Banking and Finance Singapore, Singapore, on May 29, 2017 Preface: Tribute to Teresa Curran * * * Thank you, Ravi [Menon] I m delighted to have this opportunity to return to Singapore for this year s Symposium on Asian Banking and Finance. For those of us who have been involved with this symposium over the years, this is a bittersweet occasion. Many in this room had the privilege of knowing Teresa Curran, whose steady hand guided this series for years. Teresa, who was the leader of the bank supervision division at the San Francisco Fed, had a special passion for and interest in this region of the world. The success and vibrancy of this symposium is one of her great legacies. Teresa passed away late last year, and I d like to dedicate my remarks and participation in this conference to her. Introduction Over the past decade, this symposium has become a forum for active and substantive dialogue on cooperation and collaboration across the region and the Pacific. The size of this audience and the palpable energy in this room are a testament to its success. This event and its vibrancy are also a testament to the close friendship and collaboration between the Federal Reserve Bank of San Francisco and the Monetary Authority of Singapore, our cohosts for this event. The philosopher William James wrote that our lives are like islands in the sea, or like trees in the forest. He explained that while they appear separate on the surface, they are in fact commingled beneath the soil and through the ocean floor. [1] A century later, these words ring as true as ever before. What happens in Singapore or San Francisco, or for that matter Seoul or Shanghai, is not contained by national borders. Rather, the impacts frequently breach the metaphorical gates that once divided East from West. In an increasingly interconnected global society and economy, what happens to one of us impacts all of us. With that said, our economic fates are not necessarily the same. While the U.S. economy, for example, is affected by what happens around the world, it is also very dependent on domestic developments, whether monetary, fiscal, regulatory, or from another area of policy. And this is not a uniquely American phenomenon. 1

3 Because we are at once both independent and interdependent, dialogues such as this symposium are so valuable. The theme of this year s conference is risk and resilience in global finance. Risk and resilience are also very timely topics in U.S. monetary policy. In the United States, we are making monetary policy decisions against the backdrop of shifting economic realities. Ever since the financial crisis took hold, our focus had been on the question of how to attain a sustainable recovery? Today, after a long, hard road, we re finally able to ask ourselves how do we sustain the recovery that we ve worked so hard to attain? Recognizing that the decisions we make will have global ramifications, I thought I d focus the balance of my remarks today on the approaches we re taking in the U.S. as we make monetary policy decisions in this new post-recovery era. Before I go any further, I should mention that the views expressed today are mine alone and do not necessarily reflect those of others in the Federal Reserve System. The U.S. Economy Has Recovered As President and CEO of the Federal Reserve Bank of San Francisco, I lead the largest of 12 regional banks, which covers about one-fifth of our nation s population and economy. Among my responsibilities, I bring the perspectives of my region to the Federal Open Market Committee, or FOMC the Federal Reserve s monetary policy committee. The Fed has what we call a dual mandate two big, overarching goals. These goals are maximum employment and price stability. We want everyone who wants a job to be able to find one and for inflation to average 2 percent per year. I once had a T-shirt printed up that reminded folks that the decisions we make at the Fed are data-driven. Although we live in a hyper-political era, the Fed is strictly a-political. Our independence from short-term political influence is, in fact, the most important feature of our design. [2] When you look at how the data relate to those two big goals I mentioned maximum employment and price stability they paint a very clear picture: The U.S. economy has fully recovered from the global financial crisis and the ensuing recession. In fact, the U.S. economy is about as close to the Fed s dual mandate goals as we ve ever been. When it comes to employment, economists generally view the natural rate of unemployment in the U.S. by this I mean the level consistent with an economy that is running neither too hot nor too cold as somewhere in between 4¾ percent and 5 percent. Today, the U.S. unemployment rate is 4.4 percent meaning that we ve reached and even exceeded the full employment mark. 2

4 Meanwhile, although inflation has been running somewhat below the Fed s goal of 2 percent, with the economy doing well and some of the factors that have held inflation down waning, I expect we ll reach that goal by next year. Risk Now, I d love to be able to tell you that the news is all rosy and that our work here is done. Unfortunately, they don t call economics the dismal science for nothing. I m compelled to consider what potholes may be dotting the road ahead. For starters, movement below the natural rate of unemployment carries with it the risk of the economy overheating, which could undermine the sustainability of the expansion. When you re docking a boat, you don t run it in fast towards shore and hope you can reverse the engine hard later on. That looks cool in a James Bond movie, but in the real world it relies on everything going perfectly and can easily run afoul. Instead, the cardinal rule of docking is: Never approach a dock any faster than you re willing to hit it. Similarly, in achieving sustainable growth, it is better to close in on the target carefully and avoid substantial overshooting. Resiliency With the attainment of our dual mandate goals close at hand, it s more important than ever for monetary policy to work toward what I like to call a Goldilocks economy an economy that doesn t run too hot or too cold. [3] We want the porridge to be just right. Our aim is to keep the economic expansion on a sound footing that can be sustained for as long as possible. The last thing any of us want is to undermine the hard-won gains we ve made since the dark days of the recession. As it stands today, interest rates remain near historical lows, and I m sometimes asked why we don t just keep things there. After all, if things are going well, why change? The answer is that gradually raising interest rates to bring monetary policy back to normal prevents our economy from overheating and thereby reduces the risk of a future economic correction. Now, I know there has been some general concern that as we normalize our monetary policy in the U.S. it could cause market turbulence internationally. I m familiar with the adage that when the U.S. sneezes, the world catches a cold. While my own primary focus as a U.S. policymaker is on what s best for our domestic economy, I want to reassure you that we are cognizant of the fact that our domestic actions have a global impact. If you remember nothing else I ve shared with you today, I hope you ll remember this: The last thing we want to do is to fuel unnecessary or avoidable volatility or disruption whether we re talking about domestic markets or international markets. 3

5 That s why we re taking a gradual approach to normalization and why we re being very clear, transparent, and open about how we re making decisions. In fact, this is the most telegraphed monetary policy of our lifetimes. I d also argue that in an interconnected global economy, when one country takes action to make its economy more sustainable and resilient, that adds to the sustainability and resilience of the global economy in turn. Unwinding the Balance Sheet My focus to this point has been on conventional monetary policy, and I want to close by saying a few words about how we plan to unwind the unconventional strategies we adopted during the recession and recovery. If our approach on this front sounds familiar, it s by design. That s because a gradual, predictable, and clearly communicated strategy is the right way to operate, whether we re talking about normalizing interest rates or our balance sheet. For those who might not be as familiar with the unconventional strategies we adopted during the recession, let me offer some very, very brief background: In ordinary times, the Fed focuses on affecting interest rates by setting the federal funds rate. Yet, the period since the financial crisis and Great Recession of 2007 through 2009 has been extraordinary and that s an understatement. To save the U.S. economy from deeper recession and accelerate the economic recovery, we purchased trillions of dollars of long-term Treasury and mortgage-backed securities. These actions helped the economy achieve the relatively healthy state that it s in today. [4] After making these purchases, we significantly increased the size of the Fed s holdings. Right now the Fed s balance sheet is around $4.5 trillion and we are currently keeping it at that level. As I alluded to a moment ago, we re committed to slowly shrinking the balance sheet with the same sort of widely telegraphed, gradual, and frankly boring modus operandi that we ve adopted for normalizing conventional monetary policy. This will occur organically over time, as securities mature or are paid off. The more public understanding there is, the lesser the risk of market disruption and volatility. The process will begin when we re further along the path of normalizing the level of the federal funds rate. [5] Based on my forecast, this will occur sometime later this year. [6] Of course, none of us have a crystal ball. If there were to be some sort of deteriorating of the economic outlook, or another unforeseen circumstance, this timetable would, of course, have to be altered. It s worth noting that I view balance sheet management as something that will be taking place in the background by that I mean that we will continue to use conventional monetary policy tools raising and/or lowering interest rates as the lever we operate to keep the economy from overheating or running too cold. 4

6 Conclusion At the end of the day, the success of all these strategies depends on public understanding. That s why dialogues such as the ones we re having at this symposium are so important whether our focus is monetary policy, financial regulation, or fintech. Ultimately, while the specific conditions in each of our countries may be different, the decisions we make on either side of the Pacific do not stop at our shores. So thank you all for being a part of these discussions. I look forward to hearing from you throughout the symposium. [1] Perception and Reality, in William James Essays and Lectures, ed. Richard Kamber. New York: Routledge, pp [2] Williams (2017). [3] Williams (2017). [4] Williams (2014) and Engen, Laubach, and Reifschneider (2015). [5] Board of Governors (2017). [6] See Federal Reserve Bank of New York (2017) for discussion of normalization of the balance sheet under different scenarios. References Board of Governors of the Federal Reserve System Minutes of the Federal Open Market Committee, March 14 15, Engen, Eric M., Thomas T. Laubach, and David Reifschneider The Macroeconomic Effects of the Federal Reserve s Unconventional Monetary Policies. Federal Reserve Board of Governors, Finance and Economics Discussion Series , January. Federal Reserve Bank of New York Domestic Open Market Operations during Report prepared for the Federal Open Market Committee by the Markets Group of the Federal Reserve Bank of New York. Williams, John C Monetary Policy at the Zero Lower Bound: Putting Theory into Practice. Working paper, Hutchins Center on Fiscal and Monetary Policy at Brookings. Williams, John C Keeping the Recovery Sustainable: The Essential Role of an Independent Fed. Presentation to the Santa Cruz Chamber of Commerce, Santa Cruz, California. February 28. 5

7 Benoît Cœuré: Greece: progress, challenges and the way forward Speech by Benoît Cœuré, Member of the Executive Board of the ECB, at a conference organised by The Economist: Greece: a comeback to the financial markets? A glimpse into Europe s financial landscape, Frankfurt am Main, 31 May 2017 Thank you for inviting me to speak here today. * * * The topic of this conference is very timely. As you know, in recent weeks the Greek authorities have made significant progress in adopting measures to finalise the second review of the ESM programme. Discussions on medium-term debt measures and a new IMF programme are ongoing and expected to be concluded in the weeks ahead. In my short remarks this morning, I will explain why timely clarity on debt measures and debt sustainability is important not only to restore trust in public finances but also to help rebuild confidence in the Greek economy more generally, and the financial sector in particular. But I would first like to focus on one element of the Greek adjustment programme where I believe the ECB s advice is of particular relevance the financial sector strategy. Financial sector reforms are a key element of macroeconomic adjustment programmes, for one simple reason: any sustainable economic recovery needs to be supported by an adequate supply of credit. Without credit, firms may not be able to invest in productive capital, create new employment or cover ongoing expenses. A healthy credit supply is also important for our monetary policy to filter through to households and firms: it is one of the main ways in which we can affect bank lending conditions and, ultimately, price developments. Indeed, the broad-based and solid recovery we are currently observing in the euro area economy owes much to our policy measures having been effective in repairing the bank lending channel that is, in overcoming credit supply restrictions and in bringing bank lending rates down to levels consistent with our monetary policy stance. Greece is a sad exception, unfortunately. Bank loans to the domestic non-financial private sector have contracted in every quarter since end-2008 and by a cumulative 28% up until the end of last year. And although the level of loans to the private sector has stabilised recently, rates on loans to firms are still some 250 basis points above the current euro area average. Main challenges for the Greek financial sector This means, of course, that there is still important work to do to allow credit to become a net contributor rather than an impediment to growth in Greece and to allow the Greek economy to reap the full benefits of the firming and broadening euro area recovery. 6

8 But still, we have seen progress. The situation of Greek banks has improved in several ways since the summer of 2015 when the third programme was negotiated. Capital adequacy, for example, has been strengthened from CET1 ratios of around 11% in the third quarter of 2015 to around 16-17% at the end of last year, following the successful recapitalisation of the four main banks in late Bank governance has also improved, as shown by the significant changes in the composition of Greek bank boards over the past year. And, importantly, bank profitability recovered in 2016 after years of substantial losses. The average return on assets improved from -1.9% in 2015 to 0.1% in 2016, based on continued operations. What, then, are the main obstacles that still need to be overcome? I would argue that they are mainly related to the fragile state of banks balance sheets on both the asset and liability sides. Let me start with the asset side. As you know, non-performing loans (NPLs) are a problem in many euro area countries. But in Greece 45% of all bank loans are non-performing. They severely depress the profitability of banks and their ability to extend new, productive loans to firms and households. Decisive and rapid action is therefore needed. The roadmap was drawn up last year when ECB Banking Supervision agreed with the four main Greek banks on a 50% reduction in their NPL stock by the end of Progress so far has been broadly in line with agreed targets, but NPL objectives for this year and the next two years are ambitious. A step change in NPL resolution activities will be needed in particular after the weak performance in the first months of 2017 that was, in part, also due to the uncertainties related to the delay in the second review. But I am happy to see that the Greek authorities recently passed several important pieces of legislation to support NPL resolution. Full and timely implementation of these reforms in the months ahead will be crucial to support the required step change in NPL resolution efforts. Let me highlight three elements that are of particular importance: First, the overhaul of the out-of-court workout framework. This element is of particular importance in Greece, where many firms are heavily indebted both to banks and the state. Second, legal provisions to facilitate debt restructuring agreements by reducing the liability of the individuals involved. And third, after many delays, a framework for electronic auctions for the recovery of claims. An electronic auction platform has become increasingly important as physical 7

9 auctions have essentially come to a standstill, which has caused significant losses for creditors, debtors and the economy as a whole. Let me now briefly turn to the liability side of banks balance sheets. Deposits are the cornerstone of any sound banking system. A stable deposit base allows banks to engage in maturity transformation and to extend credit to the real economy. So far, however, there is no evidence of a sustained return of private deposits in Greece. Since the summer of 2015, when capital controls were imposed, private sector deposits have only recorded a modest 2.5% increase. They remain some 25% below their levels at the end of 2014 before deposit outflows accelerated noticeably. The upshot is that Greek banks still rely to a significant extent on central bank funding. Although recourse to our facilities, including emergency liquidity assistance, has fallen from 41% of total assets in June 2015 to around 21% of assets today, total central bank funding still amounts to more than 35% of Greek GDP. Part of the reduction in central bank funding is attributable to improved access to wholesale financing. This is certainly good news. Greek banks have gradually returned to the interbank market and were able to perform repo transactions with a wide range of mostly international counterparties also thanks to the ECB, in June last year, reinstating the waiver affecting the eligibility of Greek government-related assets for Eurosystem monetary policy operations. But for credit to become a vital source of economic growth in Greece again, a lot will depend on banks being able to regain the trust of private depositors and rebuild stable funding lines in wholesale funding markets. Of course, this is not only in the hands of banks. Broader macroeconomic stabilisation is essential, as I will explain in a second. But banks need to contribute actively to this process by making further progress in repairing the asset side of their balance sheets that is, by reducing the amount of non-performing loans. Debt sustainability and the public sector purchase programme Restoring confidence, of course, also means dispelling uncertainty about the sustainability of Greek government debt and this brings me back to my opening remarks. I think we all agree that uncertainty about high public debt levels has undermined confidence in the Greek economy in general, and the financial system in particular. In this respect, we regret that no clear definition of debt relief measures was reached at the last Eurogroup meeting. Discussions are ongoing, but in my view it is important that an agreement is reached at the Eurogroup meeting on 15 June. 8

10 According to the framework agreed in May last year, debt measures would be implemented in mid-2018, at the end of the programme. But being sufficiently clear on the measures today would help frontload many of the beneficial effects, in particular the rebuilding of confidence of both the international and domestic community in the ability of the Greek economy to return to a path of normality and stability. Clarity about debt measures is also a necessary condition for Greek government bonds to be potentially eligible under the ECB s public sector purchase programme (PSPP). In June last year, the Governing Council clarified that it would examine possible purchases of Greek government bonds under the PSPP, taking into account the progress made in the analysis and reinforcement of Greece s debt sustainability, as well as other risk management considerations. Any decision by the Eurosystem will be taken independently and autonomously. This means that one important element in our deliberations is our assessment of the sustainability of Greece s public debt. But we can only make an informed assessment if we have a clear view of the nature and extent of the envisaged debt measures. Then we can assess how much they would contribute to the sustainability of Greek debt. In other words, we need a sufficient degree of specificity. And as for any other decisions, we will look at all the relevant information. The IMF s debt sustainability analysis will be an important input in this respect. Concluding remarks Let me conclude. To bring the Greek programme to a successful conclusion it is essential that the Greek authorities continue to show a serious commitment to the goals set and measures taken in the context of the programme. Only with such a commitment can all stakeholders be confident that reforms will be strengthened in the aftermath of the programme and not reversed. At the same time, other stakeholders have to do their part to put in place the conditions that will ultimately allow the Greek banking system to fully recover and to enable the country to return to the financial market. These efforts are not only about Greece they are also about the euro area as a whole. Based on currently available information, Greece is the only euro area country whose economy contracted, albeit marginally, at the start of this year, despite the cyclical recovery becoming increasingly solid and broad-based thanks in large part to our monetary policy measures, which have led to a pronounced easing of financing conditions and a convergence of funding costs across countries. But convergence will only be achieved if all euro area countries are involved. 9

11 I therefore encourage all parties to continue working hard on making the programme a complete success. Thank you. 10

12 Haruhiko Kuroda: Monetary policy - lessons learned and challenges ahead Opening remarks by Mr Haruhiko Kuroda, Governor of the Bank of Japan, at the 2017 BOJ- IMES conference, hosted by the Institute for Monetary and Economic Studies, Bank of Japan, Tokyo, 24 May2017. I. Introduction * * * Good morning. I am honored to welcome such distinguished guests to the 23rd BOJ-IMES Conference. On behalf of the conference organizers, I thank all the guests in this room, in particular those who travelled a long distance to participate in this one-and-a-half-day conference in Tokyo. This year's conference is titled "Monetary Policy: Lessons Learned and Challenges Ahead." After my remarks, Mr. Ben Bernanke, former U.S. Fed Chair, will deliver the Mayekawa Lecture based on his experience as an academic researcher and a monetary policy maker. In the afternoon, Professor Mark Gertler, our Honorary Adviser to IMES, will give the keynote speech. Tomorrow, a policy panel session will conclude the program with three panelists, Mr. Charles Evans from the Chicago Fed, Mr. Frank Smets from the European Central Bank, and my colleague at the Bank of Japan, Hiroshi Nakaso. The panel session will be moderated by Professor Marvin Goodfriend, the other Honorary Adviser to IMES. In addition, I am pleased to have three leading economists to present their papers, addressing timely and important issues at the frontier of monetary economics and monetary policy making. I am confident that we will all learn a lot during the conference. II. Three Research Questions at the Top of the Agenda In my opening remarks, I would just like to deliver a sneak peek of this year's conference by pointing out three major research topics on our agenda. A. Inflation and Its Expectations Dynamics Since the introduction of "Quantitative and Qualitative Monetary Easing (QQE)" in April 2013, raising inflation expectations to anchor them at the price stability target of 2 percent has been a crucial element of the Bank of Japan's monetary policy management. In September 2016, the Bank published a comprehensive assessment of the policy effects of QQE and other policy measures, including the negative interest rate policy. As companion papers of the comprehensive assessment, the Bank of Japan also published several empirical studies exploring the characteristics of inflation expectations in Japan and comparing them with those in other advanced economies. [1] Those studies included an analytical framework developed by Mr. Jeffrey Fuhrer from the Boston Fed, one of today's paper presenters, to assess inflation dynamics with a special focus on the role of survey-based expectations. [2] 11

13 I am sure that we have learned a lot about inflation expectations in the past few years, but there still remain many research questions on this issue yet to be addressed. For example, there seems to be a consensus that inflation expectations exhibit a certain degree of inertia or persistence, which is difficult to be explained in a full information rational expectations (FIRE) framework even with the classic assumption of nominal (price) rigidity. However, little consensus has been formed regarding the micro-foundations for such seemingly persistent inflation expectations dynamics. Against this backdrop, recent studies have increasingly focused on information rigidity, and I would like to encourage researchers to move on further along with this research agenda. B. The Natural Rate of Interest The second item on our research agenda is an old and new topic, that is, the natural rate of interest, or, in slightly more technical parlance, the equilibrium real interest rate. The natural rate of interest has long been discussed in macroeconomics and related time series analyses. If we say "our monetary policy stance remains accommodative," this means that actual real interest rates are kept at a level below the equilibrium real interest rate. This quite naturally gives rise to the question that how we can know the level of the equilibrium real interest rate. This question is more difficult than it appears. The natural rate of interest would have a clear interpretation in a solid dynamic general equilibrium model. Nevertheless, the determinants of the natural rate of interest vary, depending on how the model is specified. It is well known that, in some specific cases, the natural rate of interest coincides with the potential growth rate of the economy, but this is not always the case. Further, when trying to estimate the natural rate of interest, econometricians face a long list of technical challenges. For example, data on the risk-free interest rate with a fixed maturity are not readily available, since there is no absolutely "risk-free" asset in actual financial markets. Also, consumers' time preferences are hard to estimate, and, moreover, whose time preference we should estimate still remains an unresolved question. With the difficulties just mentioned in mind, central bankers have long made careful policy decisions using some kinds of estimates of the natural rate of interest. The stakes have become even higher in recent years when central banks try to estimate the natural rate of interest. As seen in the debate on the Secular Stagnation hypothesis proposed by Professor Lawrence Summers of Harvard University, uncertainty regarding the natural rate of interest makes it much more difficult for central banks to steer a clear course in terms of policy decisions. [3] While I am not going into the details of his hypothesis, many of us can agree that the natural rate of interest has declined in recent years and because of this decline, combined with the effective lower bound on nominal interest rates, many central banks in advanced economies developed new unconventional monetary policy tools and have embarked on carefully crafted but bold actions. In this regard, I would argue that we still face old challenges. 12

14 C. Heterogeneous Agent Macroeconomics and Distributional Effects of Monetary Policy The third issue is related to monetary policy and inequality. The order I picked the topics does not necessarily correspond to their importance; it is simply that the first two topics are closely related to the real interest rate, while the third topic deals with a very different issue. As a caveat, I would like to clearly state that monetary policy is by no means a policy tool for distributional purposes. With this proviso in mind, let me borrow a phrase delivered by U.S. Fed Chair Janet Yellen: She said, "it is important for policymakers to understand and monitor the effects of macroeconomic developments on different groups within society," and I completely agree with her on this point. [4] In the aftermath of the global financial crisis, a number of pundits argued that macroeconomics and monetary economics are totally useless. One of the misconceptions of such critics is that they believe that modern macroeconomics relies only on representative agent models and ignores important implications arising from various heterogeneities in the economy, such as debtors and creditors, the financial sector and the non-financial sector, importers and exporters, and more controversially, haves and have-nots. Heterogeneous agent models were developed in the 1990s, and have been extended since then. [5] From the viewpoint of policymakers, the true issue is whether to employ heterogeneous agent models, instead of handier representative agent models, to examine the implications of heterogeneity for macroeconomic fluctuations. This is a classic case in which Occam's razor with regard to the choice of the appropriate model applies. This question remains yet to be explored in full depth. We know that increasing attention is being paid to the distributional effects of economic and other public policies. I would like to reiterate that, under such circumstances, monetary policy is not a tool that is well suited for dealing with inequality or polarization and that central banks should remain focused on the aggregate implications of their own policy decisions. At the same time, however, this does not mean that central banks are allowed to ignore the distributional effects of monetary policy, especially if the distributional effects have an aggregate impact. With this aim, central banks should be, and in fact are, open to learning about heterogeneous agent macroeconomics. These days, much progress has been made on this front in computational economics. Central banks are keenly following the technical progress and will keep abreast with the pioneers on this front as well. III. The Way Ahead We are now about to start the 23rd BOJ-IMES Conference, which has a history of more than a quarter-century. This year's conference is organized so that discussions can revolve around the three major topics that I mentioned in these opening remarks. Nearly ten years ago, Professor Maurice Obstfeld, currently Chief Economist of the IMF and then-honorary Adviser to IMES, in this room identified the BOJ-IMES Conference as "a venue in which abstract monetary theory and practical policy questions can comfortably be discussed in full 13

15 depth and side by side." I regard his remark as a great compliment to this conference. I am convinced that this year's conference will produce further insights into more effective central bank policymaking, in a same manner as previous conferences. Thank you. [1] Bank of Japan, "Comprehensive Assessment: Developments in Economic Activity and Prices as well as Policy Effects since the Introduction of Quantitative and Qualitative Monetary Easing (QQE)," Nishino, Kousuke, Hiroki Yamamoto, Jun Kitahara, and Takashi Nagahata, "Supplementary Paper Series for the 'Comprehensive Assessment' (1): Developments in Inflation Expectations over the Three Years since the Introduction of Quantitative and Qualitative Monetary Easing (QQE)," Bank of Japan Review, No E- 13, [2] Fuhrer, Jeffrey, "The Role of Expectations in Inflation Dynamics," International Journal of Central Banking,Vol. 8, No. S1, 2012, pp [3] Summers, Lawrence H., Remarks at the IMF Fourteenth Annual Research Conference in Honor of Stanley Fischer, Washington, DC, Summers, Lawrence H., "Demand Side Secular Stagnation," American Economic Review, Vol. 105, No. 5, 2015, pp [4] Yellen, Janet L., "Macroeconomic Research After the Crisis," Speech at the 60th Annual Economic Conference Sponsored by the Federal Reserve Bank of Boston, [5] Krusell, Per, and Anthony A. Smith, Jr., "Income and Wealth Heterogeneity in the Macroeconomy," Journal of Political Economy, Vol. 106, No. 5, 1998, pp