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What does the Bank of Japan do to East Asia?

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Author Info
Bartosz Mackowiak

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Abstract

In recent policy debates some have argued that expansionary monetary policy in Japan can increase real output in Japan and in Japan´s neighbors, while others have warned that it is a beggar-thy-neighbor policy. In this paper we estimate structural vector autoregressions to assess the effects of Japanese monetary policy shocks. We find that the effects of Japanese monetary policy shocks on macroeconomic variation in East Asia have been modest and difficult to reconcile with the beggar-thy-neighbor view. We estimate that the Asian crisis was preceded by expansionary monetary policy shocks in Japan, but we fail to find support for the view that these shocks contributed to the crisis.

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Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2005-059.

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Length: 30 pages
Date of creation: Dec 2005
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Handle: RePEc:hum:wpaper:sfb649dp2005-059

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Related research
Keywords: Structural vector autoregression; sign restrictions; monetary policy shocks; spillover effects; beggar-thy-neighbor; Japan; East Asia;

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Find related papers by JEL classification:
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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References listed on IDEAS
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. Coenen, Gunter & Wieland, Volker, 2003. "The zero-interest-rate bound and the role of the exchange rate for monetary policy in Japan," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 1071-1101, July. [Downloadable!] (restricted)
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  2. Martin Eichenbaum & Charles Evans, 1992. "Some empirical evidence on the effects of monetary policy shocks on exchange rates," Working Paper Series, Macroeconomic Issues 92-32, Federal Reserve Bank of Chicago.
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  3. Ronald McKinnon & Gunther Schnabl, 2002. "Synchronized Business Cycles in East Asia: Fluctuations in the Yen/Dollar Exchange Rate and China’s Stabilizing Role," Working Papers 02010, Stanford University, Department of Economics. [Downloadable!]
  4. Uhlig, Harald, 1999. "What are the Effects of Monetary Policy on Output? Results from an Agnostic Identification Procedure," CEPR Discussion Papers 2137, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Orphanides, Athanasios & Wieland, Volker, 2000. "Efficient Monetary Policy Design near Price Stability," Journal of the Japanese and International Economies, Elsevier, vol. 14(4), pages 327-365, December. [Downloadable!] (restricted)
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  6. H. Uhlig, . "Did the Fed Surprise the Markets in 2001? A case study for VARs with Sign Restrictions," Sonderforschungsbereich 373 2001-98, Humboldt Universitaet Berlin.
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  7. Faust, Jon, 1998. "The robustness of identified VAR conclusions about money," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 49(1), pages 207-244, December. [Downloadable!] (restricted)
  8. Kim, Soyoung & Roubini, Nouriel, 2000. "Exchange rate anomalies in the industrial countries: A solution with a structural VAR approach," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 561-586, June. [Downloadable!] (restricted)
  9. Cushman, David O. & Zha, Tao, 1997. "Identifying monetary policy in a small open economy under flexible exchange rates," Journal of Monetary Economics, Elsevier, vol. 39(3), pages 433-448, August. [Downloadable!] (restricted)
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  10. Christopher A. Sims & Tao Zha, 1999. "Error Bands for Impulse Responses," Econometrica, Econometric Society, vol. 67(5), pages 1113-1156, September.
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  11. Marco Del Negro & Francesc Obiols-Homs, 2000. "Has monetary policy been so bad that it is better to get rid of it? the case of Mexico," Working Paper 2000-26, Federal Reserve Bank of Atlanta. [Downloadable!]
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  12. Ronald McKinnon & Gunther Schnabl, 2003. "Synchronised Business Cycles in East Asia and Fluctuations in the Yen/Dollar Exchange Rate," The World Economy, Blackwell Publishing, vol. 26(8), pages 1067-1088, 08. [Downloadable!] (restricted)
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  13. 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)
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  14. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1998. "Monetary Policy Shocks: What Have We Learned and to What End?," NBER Working Papers 6400, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  15. Guenter Coenen & Volker Wieland, 2003. "The Zero-Interest-Rate and the Role of the Exchange Rate for Monetary Policy in Japan," CFS Working Paper Series 2003/09, Center for Financial Studies. [Downloadable!]
  16. Svensson, Lars E O, 2000. "The Zero Bound in an Open Economy: A Foolproof Way of Escaping from a Liquidity Trap," CEPR Discussion Papers 2566, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  17. Christopher A. Sims, 1998. "Role of interest rate policy in the generation and propagation of business cycles: what has changed since the '30s?," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, issue Jun, pages 121-175. [Downloadable!]
  18. Corsetti, Giancarlo & Pesenti, Paolo & Roubini, Nouriel & Tille, Cedric, 2000. "Competitive devaluations: toward a welfare-based approach," Journal of International Economics, Elsevier, vol. 51(1), pages 217-241, June. [Downloadable!] (restricted)
  19. Bennett T. McCallum, 2000. "Theoretical analysis regarding a zero lower bound on nominal interest rates," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, pages 870-935.
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  20. Tim Callen & Warwick J. McKibbin, 2001. "Policies and Prospects in Japan and The Implications for the Asia-Pacific Region," IMF Working Papers 01/131, International Monetary Fund. [Downloadable!]
  21. Canova, Fabio & Nicolo, Gianni De, 2002. "Monetary disturbances matter for business fluctuations in the G-7," Journal of Monetary Economics, Elsevier, vol. 49(6), pages 1131-1159, September. [Downloadable!] (restricted)
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  22. Eric M. Leeper & Tao Zha, 2003. "Modest policy interventions," Working Paper 2003-24, Federal Reserve Bank of Atlanta. [Downloadable!]
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  23. Corsetti, Giancarlo & Pesenti, Paolo & Roubini, Nouriel, 1999. "What caused the Asian currency and financial crisis?," Japan and the World Economy, Elsevier, vol. 11(3), pages 305-373, October. [Downloadable!] (restricted)
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  24. Sims, Christopher A., 1992. "Interpreting the macroeconomic time series facts : The effects of monetary policy," European Economic Review, Elsevier, vol. 36(5), pages 975-1000, June. [Downloadable!] (restricted)
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  25. Sims, Christopher A & Zha, Tao, 1998. "Bayesian Methods for Dynamic Multivariate Models," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 949-68, November.
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  26. Jon Faust, 1998. "The robustness of identified VAR conclusions about money," International Finance Discussion Papers 610, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  27. Eric M. Leeper & Christopher A. Sims & Tao Zha, 1996. "What Does Monetary Policy Do?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1996-2), pages 1-78. [Downloadable!]
Full references

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. Marta Banbura & Domenico Giannone & Lucrezia Reichlin, 2008. "Large Bayesian VARs," ECARES Working Papers 2008_033, Université Libre de Bruxelles, Ecares. [Downloadable!]
    Other versions:
  2. Canova, Fabio & Favero, Carlo A, 2005. "Monetary Policy in the Euro Area: Lessons from Five Years of ECB and Implications for Turkey," CEPR Discussion Papers 5101, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  3. Fabio Canova & Carlo Favero, 2005. "Monetary Policy in the Euro area: Lessons from 5 years of ECB and implications for Turkey," Economics Working Papers 922, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
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