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

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  • Hiroshi Ugai

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

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    Abstract

    This paper surveys the empirical analyses that examine the effects of the Bank of 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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    Bibliographic 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;

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    References

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    Citations

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    Cited by:
    1. Michael Woodford & Vasco Curdia, 2010. "The Central Bank's Balance Sheet as an Instrument of Monetary Policy," 2010 Meeting Papers 136, Society for Economic Dynamics.
    2. 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.
    3. Urszula Szczerbowicz, 2011. "Are Unconventional Monetary Policies Effective?," Working Papers CELEG 1107, Dipartimento di Economia e Finanza, LUISS Guido Carli.
    4. Girardin, Eric & Moussa, Zakaria, 2011. "Quantitative easing works: Lessons from the unique experience in Japan 2001–2006," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 21(4), pages 461-495, October.
    5. 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.
    6. Moussa, Zakaria, 2010. "The Japanese Quantitative Easing Policy under Scrutiny: A Time-Varying Parameter Factor-Augmented VAR Model," MPRA Paper 29429, University Library of Munich, Germany.
    7. Watzka, Sebastian & Schenkelberg, Heike, 2011. "Real effects of Quantitative Easing at the Zero-Lower Bound: Structural VAR-based evidence from Japan," Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48687, Verein für Socialpolitik / German Economic Association.

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