Finding stability in a time of prolonged crisis: Unconventional policy rules for Japan

We compare optimal simple rules for consumption tax rates, a Taylor rule with negative interest rates, and a quantitative easing rule, for reducing government debt held by the banking system, as well as optimizing welfare. In times of crisis, we show that the QE policy rule outperforms optimally-derived simple tax-rate rules or Taylor rules with negative interest rates for mitigating the costs of post-crisis adjustment and debt overhang.