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Specification and Analysis of a Monetary Policy Rule for Japan

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  • Bennett T. McCallum

    (Professor, Carnegie Mellon University, U.S.A.)

Abstract

This paper investigates the performance, in several small-scale models of the Japanese economy, of an operational monetary policy rule related to ones previously considered for the United States. The rule dictates settings of the monetary base that are designed to produce values of nominal GNP close to targets that grow smoothly at a noninflationary rate. Simulations with quarterly data for the period 1972-92 yield predominantly favorable results. Experiments with an interest rate instrument are also conducted but the simulated performance is less desirable. One section discusses issues concerning monetary base control in Japan.

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Bibliographic Info

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

Volume (Year): 11 (1993)
Issue (Month): 2 (December)
Pages: 1-45

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Handle: RePEc:ime:imemes:v:11:y:1993:i:2:p:1-45

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  1. Martin Feldstein & James H. Stock, 1994. "The Use of a Monetary Aggregate to Target Nominal GDP," NBER Chapters, in: Monetary Policy, pages 7-69 National Bureau of Economic Research, Inc.
  2. Paul D. McNelis & Naoyuki Yoshino, 1992. "Monetary Stabilization with Interest Rate Instruments in Japan: A Linear Quadratic Control Analysis," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 10(2), pages 79-106, November.
  3. John P. Judd & Brian Motley, 1991. "Nominal feedback rules for monetary policy," Economic Review, Federal Reserve Bank of San Francisco, issue Sum, pages 3-17.
  4. Kazuo Ueda, 1993. "A Comparative Perspective on Japanese Monetary Policy: Short-Run Monetary Control and the Transmission Mechanism," NBER Chapters, in: Japanese Monetary Policy, pages 7-30 National Bureau of Economic Research, Inc.
  5. R.W. Hafer & Joseph H. Haslag & Scott E. Hein, 1991. "Evaluating monetary base targeting rules," Research Paper 9104, Federal Reserve Bank of Dallas.
  6. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  7. Marvin Goodfriend & Monica Hargraves, 1983. "A historical assessment of the rationales and functions of reserve requirements," Working Paper 83-01, Federal Reserve Bank of Richmond.
  8. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  9. Mccallum, Bennet T., 1988. "Robustness properties of a rule for monetary policy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 29(1), pages 173-203, January.
  10. McCallum, Bennett T & Hoehn, James G, 1983. "Instrument Choice for Money Stock Control with Contemporaneous and Lagged Reserve Requirements: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(1), pages 96-101, February.
  11. Robert J. Barro, 1976. "Unanticipated Money Growth and Unemployment in the United States," Working Papers 234, Queen's University, Department of Economics.
  12. Bean, Charles R, 1983. "Targeting Nominal Income: An Appraisal," Economic Journal, Royal Economic Society, vol. 93(372), pages 806-19, December.
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