But interest smoothing becomes dominant in the alternative formulation alongside a significant weight on inflation. In this formulation, although the output gap has the expected sign, it turns out to be statistically insignificant. However, the explanatory power of the equation improves substantially as compared with the standard formulation (Table 2).
We hope that all concerned will correctly and with balanced judgement recognize both the favorable effects and the limits of current monetary easing measures. Let me begin with the favorable effects of the current measures. Since monetary easing in March, various interest rates have substantially declined to levels below the lowest levels seen during the zero interest rate policy period.