Advanced Search
MyIDEAS: Login to save this article or follow this journal

Monetary Stabilization with Interest Rate Instruments in Japan: A Linear Quadratic Control Analysis

Contents:

Author Info

  • Paul D. McNelis

    (Professor, Georgetown University, U.S.A.)

  • Naoyuki Yoshino

    (Professor, Department of Economics, Keio University)

Abstract

This paper examines the relation between alternative objectives for interest rate rules in the conduct of monetary policy, and the volatility of asset prices, the exchange rate, and the M2 monetary aggregate, as well as output and inflation. We make use of a small econometric model with unexpected oil price and foreign output shocks, simulation analysis, and stochastic control methods based on linear quadratic loss functions with state-space constraints. Our results show the stabilizing powers of a systematic feedback policy for the call rate. Whether the Bank of Japan follows a broad-based multivariate target, or specific targets, such as the exchange rate or asset prices, a feedback control policy succeeds in reducing the variability of all of the macroeconomic variables, relative to a base path in which the call rate simply followed a stochastic autoregressive process. Results based on 1,000 repeated of stochastic simulations indicate, however, that the greatest gains for all variables with call-rate feedback policy come from exchange rate targeting or broadbased targeting rather than broad money or inflation targeting.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.imes.boj.or.jp/research/papers/english/me10-2-4.pdf
Download Restriction: no

Bibliographic Info

Article provided by Institute for Monetary and Economic Studies, Bank of Japan in its journal Monetary and Economic Studies.

Volume (Year): 10 (1992)
Issue (Month): 2 (November)
Pages: 79-106

as in new window
Handle: RePEc:ime:imemes:v:10:y:1992:i:2:p:79-106

Contact details of provider:
Postal: 2-1-1 Nihonbashi, Hongoku-cho, Chuo-ku, Tokyo 103
Phone: +81-3-3279-111
Fax: +81-3-3510-1265
Email:
Web page: http://www.imes.boj.or.jp/
More information through EDIRC

Related research

Keywords:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Bennett T. McCallum, 1993. "Specification and Analysis of a Monetary Policy Rule for Japan," NBER Working Papers 4449, National Bureau of Economic Research, Inc.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ime:imemes:v:10:y:1992:i:2:p:79-106. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Kinken).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.