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Monetary Factors and Inflation in Japan

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Author Info
Assenmacher-Wesche, Katrin
Gerlach, Stefan
Sekine, Toshitaka

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Abstract

Recently, the Bank of Japan outlined a “two perspectives” approach to the conduct of monetary policy that focuses on risks to price stability over different time horizons. Interpreting this as pertaining to different frequency bands, we use band spectrum regression to study the determination of inflation in Japan. We find that inflation is related to money growth and real output growth at low frequencies and the output gap at higher frequencies. Moreover, this relationship reflects Granger causality from money growth and the output gap to inflation in the relevant frequency bands.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6650.

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Date of creation: Jan 2008
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Handle: RePEc:cpr:ceprdp:6650

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Related research
Keywords: frequency domain; Phillips curve; quantity theory; spectral regression;

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Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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  1. Granger, C. W. J., 1980. "Testing for causality : A personal viewpoint," Journal of Economic Dynamics and Control, Elsevier, vol. 2(1), pages 329-352, May. [Downloadable!] (restricted)
  2. Fujiki, Hiroshi & Watanabe, Kiyoshi, 2004. "Japanese Demand for M1 and Demand Deposits: Cross-Sectional and Time-Series Evidence from Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 22(3), pages 47-77, October. [Downloadable!]
  3. Paul R. Krugman, 1998. "It's Baaack: Japan's Slump and the Return of the Liquidity Trap," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1998-2), pages 137-206. [Downloadable!]
  4. Stefan Gerlach & Katrin Assenmacher-Wesche, 2006. "Interpreting Euro area inflation at high and low frequencies," BIS Working Papers 195, Bank for International Settlements. [Downloadable!]
    Other versions:
  5. Lars E. O. Svensson, 2003. "Escaping from a Liquidity Trap and Deflation: The Foolproof Way and Others," Journal of Economic Perspectives, American Economic Association, vol. 17(4), pages 145-166, Fall. [Downloadable!] (restricted)
    Other versions:
  6. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July. [Downloadable!] (restricted)
  7. Toshitaka Sekine, 2001. "Modeling and Forecasting Inflation in Japan," IMF Working Papers 01/82, International Monetary Fund. [Downloadable!]
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  9. Assenmacher-Wesche, Katrin & Gerlach, Stefan, 2006. "Money Growth, Output Gaps and Inflation at Low and High Frequency: Spectral Estimates for Switzerland," CEPR Discussion Papers 5723, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  10. Fujiwara, Ippei, 2006. "Evaluating monetary policy when nominal interest rates are almost zero," Journal of the Japanese and International Economies, Elsevier, vol. 20(3), pages 434-453, September. [Downloadable!] (restricted)
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  11. Junsoo Lee & Mark C. Strazicich, 2004. "Minimum LM Unit Root Test with One Structural Break," Working Papers 04-17, Department of Economics, Appalachian State University. [Downloadable!]
  12. Junsoo Lee & Mark C. Strazicich, 2003. "Minimum Lagrange Multiplier Unit Root Test with Two Structural Breaks," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1082-1089, 07. [Downloadable!] (restricted)
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    Other versions:
  14. Robert L. Hetzel, 2004. "Price stability and Japanese monetary policy," Working Paper 04-01, Federal Reserve Bank of Richmond. [Downloadable!]
  15. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July. [Downloadable!] (restricted)
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  16. Bae, Youngsoo & Kakkar, Vikas & Ogaki, Masao, 2006. "Money Demand in Japan and Nonlinear Cointegration," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(6), pages 1659-1667, September. [Downloadable!] (restricted)
  17. Nagayasu, Jun, 2003. "A re-examination of the Japanese money demand function and structural shifts," Journal of Policy Modeling, Elsevier, vol. 25(4), pages 359-375, June. [Downloadable!] (restricted)
  18. Gauti B. Eggertsson & Michael Woodford, 2003. "The Zero Bound on Interest Rates and Optimal Monetary Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(2003-1), pages 139-235. [Downloadable!]
  19. Kitamura, Tomiyuki & Koike, Ryoji, 2003. "The Effectiveness of Forecasting Methods Using Multiple Information Variables," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(1), pages 105-43, February. [Downloadable!]
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  21. Takeshi Kimura & Hiroshi Kobayashi & Jun Muranaga & Hiroshi Ugai, 2003. "The effect of the increase in the monetary base of Japan's economy at zero interest rates: an empirical analysis," BIS Papers chapters, in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 276-312 Bank for International Settlements. [Downloadable!]
  22. Ryuzo Miyao, 2005. "Use Of The Money Supply In The Conduct Of Japan'S Monetary Policy: Re-Examining The Time-Series Evidence," The Japanese Economic Review, Japanese Economic Association, vol. 56(2), pages 165-187. [Downloadable!] (restricted)
  23. Stefan Gerlach, 2004. "The two pillars of the European Central Bank," Economic Policy, CEPR, CES, MSH, vol. 19(40), pages 389-439, October. [Downloadable!] (restricted)
  24. Sekine, Toshitaka, 1998. "Financial Liberalization, the Wealth Effect, and the Demand for Broad Money in Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 16(1), pages 35-55, May. [Downloadable!]
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  26. Katrin Assenmacher-Wesche & Stefan Gerlach, 2007. "Money at Low Frequencies," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 534-542, 04-05. [Downloadable!] (restricted)
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