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Policy Duration Effect under the Zero Interest Rate Policy in 1999-2000: Evidence from Japan's Money Market Data

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  • Fujiki, Hiroshi

    (Institute for Monetary & Econ Studies, Bank of Japan)

  • Shiratsuka, Shigenori

    (Institute for Monetary & Econ Studies, Bank of Japan)

Abstract

This paper quantifies the policy duration effect of the zero interest rate policy implemented in Japan from February 1999 to August 2000. Our empirical analysis shows that the policy duration effect observed in Japanese financial markets emerged via the expectations channel on the future course of monetary policy actions, supplemented significantly by liquidity effects in the severe financial conditions. This finding leads to the policy implication that the effectiveness of the zero interest rate policy depends crucially on the financial and economic conditions.

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File URL: http://www.imes.boj.or.jp/research/papers/english/me20-1-1.pdf
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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): 20 (2002)
Issue (Month): 1 (January)
Pages: 1-31

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Handle: RePEc:ime:imemes:v:20:y:2002:i:1:p:1-31

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Cited by:
  1. Kozo Ueda, 2010. "A Time-Invariant Duration Policy under the Zero Lower Bound," IMES Discussion Paper Series 10-E-12, Institute for Monetary and Economic Studies, Bank of Japan.
  2. Michal Franta, 2011. "Identification of Monetary Policy Shocks in Japan Using Sign Restrictions within the TVP-VAR Framework," IMES Discussion Paper Series 11-E-13, Institute for Monetary and Economic Studies, Bank of Japan.
  3. Ubukata, M. & Fukushige, M., 2009. "Estimation and inference in the yield curve model with an instantaneous error term," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 79(9), pages 2938-2946.
  4. Shigenori Shiratsuka, 2009. "Size and Composition of the Central Bank Balance Sheet: Revisiting Japanfs Experience of the Quantitative Easing Policy," IMES Discussion Paper Series 09-E-25, Institute for Monetary and Economic Studies, Bank of Japan.
  5. Hiroshi Ugai, 2007. "Effects of the Quantitative Easing Policy: A Survey of Empirical Analyses," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 25(1), pages 1-48, March.
  6. Kazuo Ueda, 2009. "Non-Traditional Monetary Polices: G7 Central Banks during 2007-2009 and the Bank of Japan during 1998-2006," CARF F-Series CARF-F-180, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  7. Aron Drew & Özer Karagedikli, 2007. "Some Benefits of Monetary-Policy Transparency in New Zealand," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 57(11-12), pages 521-539, December.
  8. Jouchi Nakajima & Shigenori Shiratsuka & Yuki Teranishi, 2010. "The Effects of Monetary Policy Commitment: Evidence from Time- varying Parameter VAR Analysis," IMES Discussion Paper Series 10-E-06, Institute for Monetary and Economic Studies, Bank of Japan.
  9. Shigeru Iwata, 2010. "Monetary Policy and the Term Structure of Interest Rates When Short-Term Rates Are Close to Zero," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 28, pages 59-78, November.
  10. Nobuyuki Oda & Kazuo Ueda, 2005. "The Effects of the Bank of Japan's Zero Interest Rate Commitment and Quantitative Monetary Easing on the Yield Curve: A Macro-Finance Approach (subsequently published in "The Japanese Economic Re," CARF F-Series CARF-F-031, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  11. Iwamoto, Yasushi, 2005. "Monetary and Fiscal Policy to Escape from a Deflationary Trap," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 23(1), pages 1-46, February.

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