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Evaluating Monetary Policy When Nominal Interest Rates Are Almost Zero

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Author Info
Ippei Fujiwara

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Abstract

The non-negativity constraint on nominal interest rates may have been a major factor behind a putative structural break in the effectiveness of monetary policy. To check for the existence of such a break without making prior assumptions about timing, and to enable comparison between pre- and post-break monetary policy, we employ an identified Markov switching VAR framework. Estimation results support the existence of a structural break around the time when the de-facto zero nominal interest rate policy was resumed and the effectiveness of monetary policy is seen to weaken since then although slightly positive effects from monetary easing still exist

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Paper provided by Econometric Society in its series Econometric Society 2004 Far Eastern Meetings with number 620.

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Date of creation: 11 Aug 2004
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Handle: RePEc:ecm:feam04:620

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Keywords: Markov Switching VAR; Monetary Policy;

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Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Jouchi Nakajima & Munehisa Kasuya & Toshiaki Watanabe, 2009. "Bayesian Analysis of Time-Varying Parameter Vector Autoregressive Model for the Japanese Economy and Monetary Policy," IMES Discussion Paper Series 09-E-13, Institute for Monetary and Economic Studies, Bank of Japan. [Downloadable!]
  2. Assenmacher-Wesche, Katrin & Gerlach, Stefan & Sekine, Toshitaka, 2008. "Monetary Factors and Inflation in Japan," CEPR Discussion Papers 6650, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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