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Effects of the Quantitative Easing Policy: A Survey of Empirical Analyses

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Author Info
Hiroshi Ugai (Monetary Affairs Department, Bank of Japan (currently, General Manager, Okayama Branch) (E-mail: hiroshi.ugai@boj.or.jp))
Abstract

f Japanfs (BOJfs) quantitative easing policy (QEP), which was implemented from March 2001 through March 2006. The survey confirms a clear effect whereby the commitment to maintain the QEP fostered the expectations that the zero interest rate would continue into the future, thereby lowering the yield curve centering on the short- to medium-term range. There were also phases in which an increase in the current account balances held by financial institutions at the BOJ bolstered this expectation. While the results were mixed as to whether expansion of the monetary base and altering the composition of the BOJfs balance sheet led to portfolio rebalancing, generally this effect, if any, was smaller than that stemming from the commitment. When viewing the QEPfs impact on Japanfs economy through various transmission channels, many of the analyses suggest that the QEP created an accommodative environment in terms of corporate financing. In particular, the QEP contained financial institutionsf funding costs from the market and staved off financial institutionsf funding uncertainties. The QEPfs effect on raising aggregate demand and prices was often limited, due largely to the then progressing corporate balance-sheet adjustment, as well as the zero bound constraint on interest rates.

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File URL: http://www.imes.boj.or.jp/english/publication/mes/2007/me25-1-1.pdf
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Publisher Info
Article provided by Institute for Monetary and Economic Studies, Bank of Japan in its journal Monetary and Economic Studies.

Volume (Year): 25 (2007)
Issue (Month): 1 (March)
Pages: 1-48
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Handle: RePEc:ime:imemes:v:25:y:2007:i:1:p:1-48

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Related research
Keywords: Zero interest rate policy Quantitative easing policy Commitment Zero bound constraint on interest rates Deflation

Find related papers by JEL classification:
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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  1. Edward Nelson & Anna J. Schwartz, 2007. "The Impact of Milton Friedman on Modern Monetary Economics: Setting the Record Straight on Paul Krugman's "Who Was Milton Friedman?"," NBER Working Papers 13546, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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