The Holy Grail of Macroeconomics

Reviews from the previous edition "...provide fascinating insights into the problems of Japan...interesting thesis" (Wilmott.com/blogs, August 2009) "the Japanese policymakers who told everyone the US was in danger of falling into a prolonged period of economic weakness were right. To understand why this is true, you need to read a brilliant book by Richard Koo of the Nomura Research Institute." (Financial Times, January 2009) "the definitive book on Japan's decade-long recession in the 1990s." (USA Today, March 2009) "Books about the current global economic crisis are being written and published by the truckload. But few perhaps none are worth reading Richard Koo, chief economist at the Nomura Research Institute in Tokyo, a think tank attached to Japan's biggest investment bank, watched Japan's 'lost decade' from an excellent vantage point: he was close enough to understand the detail, data and ways in which both corporate and political decisions were made, and independent enough to be able to analyse what happened in a reasonably detached and cool way." (Survival, May 2009) "A must-read to an understanding of what Japan went through and what the United States and Europe may experience is Koo's latest book The Holy Grail of Macroeconomics: Lessons from Japan's Great Recession." (The Edge Financial Daily, December 2008)

Richard C. Koo is the Chief Economist of Nomura Research Institute, the research arm of Nomura Securities, the leading securities house in Japan. Consistently voted as one of the most reliable economists by Japanese capital and financial market participants for nearly a decade, he has also advised successive prime ministers on how best to deal with Japan's economic and banking problems. He served as an economist with the Federal Reserve Bank of New York, and was a Doctoral Fellow of the Board of Governors of the Federal Reserve System. Author of many books, including Balance Sheet Recession: Japan's Struggle with Uncharted Economics and its Global Implications, and a visiting professor of Waseda University, he was awarded the Abramson Award by the National Association of Business Economics, Washington, D.C. in 2001.

Acknowledgments ix Preface xi Chapter 1 Japans Recession 1 Chapter 2 Characteristics of Balance Sheet Recessions 39 Chapter 3 The Great Depression was a Balance Sheet Recession 85 Chapter 4 Monetary, Foreign Exchange, and Fiscal Policy During a Balance Sheet Recession 125 Chapter 5 Yin and Yang Economic Cycles and the Holy Grail of Macroeconomics 157 Chapter 6 Pressure of Globalization 185 Chapter 7 Ongoing Bubbles and Balance Sheet Recessions 221 Chapter 8 World in Balance Sheet Recession 253 Appendix: Thoughts on Walras and Macroeconomics 295 References and Bibliography 309 Index 321