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The estimation of monetary policy reaction function in a data-rich environment: The case of Japan

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  • Shibamoto, Masahiko

Abstract

This paper reports the estimates of a monetary policy reaction function for the Bank of Japan in a data-rich environment. There are two main findings. First, a weak identification problem arises in the estimates under the specifications that some previous works employ, though in a data-rich environment it may be possible to avoid this problem. Second, the evidence from the estimates in a data-rich environment suggests that the Bank of Japan only controlled the inflation forecast, and placed no weight on output stabilization directly over the period from November 1988 through February 2001.

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File URL: http://www.sciencedirect.com/science/article/B6VF1-4P59XB3-2/2/8a6c8c847151b133db33f95f50b3e403
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Bibliographic Info

Article provided by Elsevier in its journal Japan and the World Economy.

Volume (Year): 20 (2008)
Issue (Month): 4 (December)
Pages: 497-520

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Handle: RePEc:eee:japwor:v:20:y:2008:i:4:p:497-520

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Web page: http://www.elsevier.com/locate/inca/505557

Related research

Keywords: Monetary policy reaction function Data-rich environment Weak identification;

References

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  1. Mototsugu Shintani, 2010. "Nonlinear Forecasting Analysis Using Diffusion Indexes: An Application to Japan," Levine's Working Paper Archive 506439000000000168, David K. Levine.
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  3. Mario Forni & Marc Hallin & Marco Lippi & Lucrezia Reichlin, 2003. "The Generalized Dynamic Factor Model. One-Sided Estimation and Forecasting," LEM Papers Series 2003/13, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
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  9. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "Monetary policy rules and macroeconomic stability: Evidence and some theory," Economics Working Papers 350, Department of Economics and Business, Universitat Pompeu Fabra, revised May 1999.
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  12. Jang, Kyungho & Ogaki, Masao, 2003. "The Effects of Japanese Monetary Policy Shocks on Exchange Rates: A Structural Vector Error Correction Model Approach," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(1), pages 1-34, February.
  13. Marc Hallin & Mario Forni & Marco Lippi & Lucrezia Reichlin, 2003. "Do financial variables help forecasting inflation and real activity in the Euro area ?," ULB Institutional Repository 2013/2123, ULB -- Universite Libre de Bruxelles.
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  16. Kasa, Ken & Popper, Helen, 1997. "Monetary Policy in Japan: A Structural VAR Analysis," Journal of the Japanese and International Economies, Elsevier, vol. 11(3), pages 275-295, September.
  17. Tachibana, Minoru, 2006. "Did the Bank of Japan have a target zone for the inflation rate?," Economics Letters, Elsevier, vol. 92(1), pages 131-136, July.
  18. James H. Stock & Jonathan Wright, 2000. "GMM with Weak Identification," Econometrica, Econometric Society, vol. 68(5), pages 1055-1096, September.
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  20. Miyao, Ryuzo, 2000. "The Role of Monetary Policy in Japan: A Break in the 1990s?," Journal of the Japanese and International Economies, Elsevier, vol. 14(4), pages 366-384, December.
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  22. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December.
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  24. Ma, Adrian, 2002. "GMM estimation of the new Phillips curve," Economics Letters, Elsevier, vol. 76(3), pages 411-417, August.
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Citations

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Cited by:
  1. Sánchez-Fung, José R., 2011. "Estimating monetary policy reaction functions for emerging market economies: The case of Brazil," Economic Modelling, Elsevier, vol. 28(4), pages 1730-1738, July.
  2. Pang, Iris Ai Jao, 2010. "Were Fed’s active monetary policy actions necessary?," MPRA Paper 32496, University Library of Munich, Germany.
  3. Pang, Iris Ai Jao, 2010. "Forecasting Hong Kong economy using factor augmented vector autoregression," MPRA Paper 32495, University Library of Munich, Germany.

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