Output Composition of the Monetary Policy Transmission Mechanism in Japan
AbstractIn this paper, we investigate the output composition of the monetary policy transmission mechanism in Japan. The predominant channel through which monetary policy affects output in Japan is usually thought to be the investment channel, namely the process whereby a change in the interest rate alters the cost of capital and therefore investment. In the United States, however, the consumption channel, which works through intertemporal substitution, is commonly considered the more significant of the two. The aim of this paper is twofold: 1) based on analysis using VAR models to understand which of the two channels, the consumption channel or the investment channel, plays the more important role in the transmission of the Japanese monetary policy; and 2) to contribute to the research on what Angeloni, Kashyap, Mojon and Terlizzese (2003) term the "Output Composition Puzzle," referring to the fact that whereas in the United States the predominant driver of output changes is the consumption channel, in the Euro area it is the investment channel. Results obtained from the Japanese models imply that the investment channel is more important.
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Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.
Volume (Year): 4 (2004)
Issue (Month): 1 (September)
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Web page: http://www.degruyter.com
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- Fujiwara, Ippei & Hara, Naoko & Hirose, Yasuo & Teranishi, Yuki, 2005.
"The Japanese Economic Model (JEM),"
Monetary and Economic Studies,
Institute for Monetary and Economic Studies, Bank of Japan, vol. 23(2), pages 61-142, May.
- Tomas Havranek & Marek Rusnak, 2012.
"Transmission Lags of Monetary Policy: A Meta-Analysis,"
William Davidson Institute Working Papers Series
wp1038, William Davidson Institute at the University of Michigan.
- Tomas Havranek & Marek Rusnak, 2012. "Transmission Lags of Monetary Policy: A Meta-Analysis," Working Papers IES 2012/27, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2012.
- Tomas Havranek & Marek Rusnak, 2012. "Transmission Lags of Monetary Policy: A Meta-Analysis," Working Papers 2012/10, Czech National Bank, Research Department.
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