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The Effectiveness of Nontraditional Monetary Policy: The Case of Japan

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  • Yuzo Honda

Abstract

type="main"> The effectiveness of nontraditional monetary policy is controversial, at least in Japan. Making use of data from the quantitative easing monetary policy period, this paper presents statistical evidence on the effectiveness of nontraditional monetary policy. We demonstrate empirically that the quantitative easing monetary policy adopted by the Bank of Japan for the period from March 2001 to March 2006 had a stimulating effect on investment and production, at least through Tobin's q channel. We also provide a simple operational model in which an injection of base money lowers the interest rate on bonds, reduces the required rate of returns from capital stocks and depreciates the value of the domestic currency.

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  • Yuzo Honda, 2014. "The Effectiveness of Nontraditional Monetary Policy: The Case of Japan," The Japanese Economic Review, Japanese Economic Association, vol. 65(1), pages 1-23, March.
    • Handle: RePEc:bla:jecrev:v:65:y:2014:i:1:p:1-23
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    File URL: http://hdl.handle.net/10.1111/jere.12036
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    Cited by:

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    2. Fukuda, Shin-ichi, 2015. "Abenomics: Why was it so successful in changing market expectations?," Journal of the Japanese and International Economies, Elsevier, vol. 37(C), pages 1-20.
    3. Fumio Hayashi, 2019. "Peril of the Inflation Exit Condition," The Japanese Economic Review, Springer, vol. 70(1), pages 4-27, March.
    4. Ono, Masanori, 2017. "Inflation, expectation, and the real economy in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 45(C), pages 13-26.
    5. Chikashi Tsuji, 2016. "Did the expectations channel work? Evidence from quantitative easing in Japan, 2001–06," Cogent Economics & Finance, Taylor & Francis Journals, vol. 4(1), pages 1210996-121, December.
    6. Yuzo Honda & Hitoshi Inoue, 2017. "The Effectiveness of the Negative Interest Rate Policy in Japan: An Early Assessment," Discussion Papers in Economics and Business 17-02, Osaka University, Graduate School of Economics.
    7. Lau, Wee-Yeap & Yip, Tien-Ming, 2020. "How do monetary transmission channels influence inflation in the short and long run? Evidence from the QQE regime in Japan," The Journal of Economic Asymmetries, Elsevier, vol. 21(C).
    8. Shibata, Tsubasa & Kosaka, Hiroyuki, 2018. "An econometric analysis of unconventional monetary policy : the cases of Japan and United States," IDE Discussion Papers 704, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    9. Chun-Hung Kuo & Hiroaki Miyamoto, 2016. "Quantitative Easing and the Labor Market in Japan," Working Papers EMS_2016_02, Research Institute, International University of Japan.

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