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Asset Price Fluctuations in Japan: What Role for Monetary Policy?

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  • Michael M. Hutchison

    (Professor, University of California, Santa Cruz. Visiting Scholar, Federal Reserve Bank of San Francisco)

Abstract

This paper examines the nature of fundamental disturbances that have accounted for fluctuations in Japanese nominal and real land prices during the post-war period. A distinction is made between macroeconomic supply and demand shocks, as well as land-market specific shocks, in the context of a dynamic structural VAR model. The results indicate that shocks to aggregate demand-a category encompassing most monetary policy shifts-explain only a small part of the movement in land prices around the longer-term rising trend. Aggregate supply shocks are an important explanatory factor. Much of the variance in land prices also is attributable to factors originating in the land market itself, potentially including speculative bubbles.

Suggested Citation

  • Michael M. Hutchison, 1994. "Asset Price Fluctuations in Japan: What Role for Monetary Policy?," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 12(2), pages 61-83, December.
    • Handle: RePEc:ime:imemes:v:12:y:1994:i:2:p:61-83
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    Cited by:

    1. Adam Posen, 2003. "It Takes More Than a Bubble to Become Japan," RBA Annual Conference Volume (Discontinued), in: Anthony Richards & Tim Robinson (ed.),Asset Prices and Monetary Policy, Reserve Bank of Australia.
    2. Iacoviello, Matteo, 2000. "House prices and the macroeconomy in Europe: Results from a structural var analysis," Working Paper Series 0018, European Central Bank.
    3. Kiyohiko G. Nishimura & Fukujyu Yamazaki & Takako Idee & Toshiaki Watanabe, 1999. "Distortionary Taxation, Excessive Price Sensitivity, and Japanese Land Prices," NBER Working Papers 7254, National Bureau of Economic Research, Inc.
    4. Matteo Iacoviello, 2002. "House Prices and Business Cycles in Europe: a VAR Analysis," Boston College Working Papers in Economics 540, Boston College Department of Economics.
    5. Alberto Montagnoli & Oreste Napolitano, 2004. "Financial Condition Index and interest rate settings: a comparative analysis," Money Macro and Finance (MMF) Research Group Conference 2004 1, Money Macro and Finance Research Group.
    6. 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.
    7. Sato, Kazuo, 1995. "Bubbles in Japan's urban land market: An analysis," Journal of Asian Economics, Elsevier, vol. 6(2), pages 153-176.
    8. Iacoviello, Matteo, 2000. "House prices and the macroeconomy in Europe: Results from a structural var analysis," Working Paper Series 18, European Central Bank.
    9. Mio, Hitoshi, 2002. "Identifying Aggregate Demand and Aggregate Supply Components of Inflation Rate: A Structural Vector Autoregression Analysis for Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 20(1), pages 33-56, January.

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