<jats:title>Abstract</jats:title><jats:p>In this paper, I use a simple SIR Macro model to examine Japan’s soft lockdown policies in 2021 under the COVID-19 crisis. As real-time research, this paper consists of two parts written during two different research periods. The first part, which was originally reported in February 2021, studies the Japan’s second soft lockdown policy (state of emergency declaration) from January to March 2021. After the model is calibrated using 2020 data, the results show that a long enough lockdown can avoid future lockdowns, improving both the infection and the economy. In addition, I propose the ICU targeting policy, which keeps the number of severe patients at a constant level, mimicking the monetary policy’s inflation targeting. The model’s prediction is evaluated from an ex-post perspective in the second part, written in July 2021. I find that the model broadly captures the realized consequences of the second soft lockdown and the subsequent paths. Furthermore, the simulation is projected to the end of the pandemic under a revised scenario, incorporating the proliferation of COVID-19 variants. Finally, I discuss the effectiveness of the inverse lockdown (economic stimulus) policy in the fall of 2021 under the dynamic infection externality.</jats:p>

<jats:title>Abstract</jats:title><jats:p>In response to the COVID-19 crisis, governments worldwide have been formulating and implementing different strategies to mitigate its social and economic impacts. We study the household consumption responses to Japan’s COVID-19 unconditional cash transfer program. Owing to frequent delays in local governments’ administrative procedures, the timing of the payment to households varied unexpectedly. Using this natural experiment, we analyze households’ consumption responses to cash transfers using high-frequency data from personal finance management software that links detailed information on expenditure, income, and wealth. We construct three consumption measures: one captures the baseline marginal propensity to consume (MPC), and the other two are for the lower and the upper bound of MPC. Additionally, we explore heterogeneity in MPCs by household income, wealth, and population characteristics, as well as consumption categories. Our results show that households exhibit immediate and non-negligible positive responses in household expenditure. There is significant heterogeneity depending on various household characteristics, with liquidity constraint status being the most crucial factor, in line with the standard consumption theory. Additionally, this study provides policymakers with insights regarding targeted cash transfer programs, conditioning on labor income, and liquidity constraints.</jats:p>

We show that real indeterminacy of stationary equilibria, by which the set of stationary equilibria is a continuum and the real allocation varies among equilibria, may arise in some general equilibrium models with fiat money. The conditions under which such equilibria arise are: (i) each household optimally saves a constant amount of money; and (ii) at least two households face different budget constraints. We present various models, including a decentralized money search model and a centralized model with a monopoly firm, to explain how these conditions lead to real indeterminacy. Finally, we present a policy that uniquely implements any desirable outcome.