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Bayesian Analysis of Time-Varying Parameter Vector Autoregressive Model for the Japanese Economy and Monetary Policy

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Author Info

  • Jouchi Nakajima

    (Institute for Monetary and Economic Studies, Bank of Japan (E-mail: jouchi.nakajima-1@boj.or.jp))

  • Munehisa Kasuya

    (Research and Statistics Department, Bank of Japan (E-mail: munehisa.kasuya@boj.or.jp))

  • Toshiaki Watanabe

    (Professor, Institute of Economic Research, Hitotsubashi University, and Institute for Monetary and Economic Studies, Bank of Japan (E-mail: watanabe@ier.hit-u.ac.jp))

Abstract

This paper analyzes the time-varying parameter vector autoregressive (TVP-VAR) model for the Japanese economy and monetary policy. The time-varying parameters are estimated via the Markov chain Monte Carlo method and the posterior estimates of parameters reveal the time-varying structure of the Japanese economy and monetary policy during the period from 1981 to 2008. The marginal likelihoods of the TVP-VAR model and other VAR models are also estimated. The estimated marginal likelihoods indicate that the TVP-VAR model best fits the Japanese economic data.

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Bibliographic Info

Paper provided by Institute for Monetary and Economic Studies, Bank of Japan in its series IMES Discussion Paper Series with number 09-E-13.

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Date of creation: May 2009
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Handle: RePEc:ime:imedps:09-e-13

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Keywords: Bayesian inference; Markov chain Monte Carlo; Monetary policy; State space model; Structural vector autoregressive model; Stochastic volatility; Time-varying parameter;

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References

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Cited by:
  1. Kagraoka, Yusho & Moussa, Zakaria, 2013. "Quantitative easing, credibility and the time-varying dynamics of the term structure of interest rate in Japan," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 25(C), pages 181-201.
  2. Jouchi Nakajima, 2011. "Time-Varying Parameter VAR Model with Stochastic Volatility: An Overview of Methodology and Empirical Applications," IMES Discussion Paper Series, Institute for Monetary and Economic Studies, Bank of Japan 11-E-09, Institute for Monetary and Economic Studies, Bank of Japan.
  3. Henrike Michaelis & Sebastian Watzka, 2014. "Are there Differences in the Effectiveness of Quantitative Easing at the Zero-Lower-Bound in Japan over Time?," CESifo Working Paper Series 4901, CESifo Group Munich.
  4. Michaelis, Henrike & Watzka, Sebastian, 2014. "Are there Differences in the Effectiveness of Quantitative Easing in Japan over Time?," Discussion Papers in Economics, University of Munich, Department of Economics 21087, University of Munich, Department of Economics.
  5. Bekiros, Stelios D. & Paccagnini, Alessia, 2014. "Bayesian forecasting with small and medium scale factor-augmented vector autoregressive DSGE models," Computational Statistics & Data Analysis, Elsevier, Elsevier, vol. 71(C), pages 298-323.
  6. Chance Mwabutwa & Manoel Bittencourt & Nicola Viegi, 2013. "Evolution of Monetary Policy Transmission Mechanism in Malawi: A TVP-VAR Approach," Working Papers 201327, University of Pretoria, Department of Economics.
  7. 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.
  8. Chai, Jian & Guo, Ju-E. & Meng, Lei & Wang, Shou-Yang, 2011. "Exploring the core factors and its dynamic effects on oil price: An application on path analysis and BVAR-TVP model," Energy Policy, Elsevier, Elsevier, vol. 39(12), pages 8022-8036.
  9. Masazumi Hattori & Andreas Schrimpf & Vladyslav Sushko, 2013. "The response of tail risk perceptions to unconventional monetary policy," BIS Working Papers 425, Bank for International Settlements.
  10. Banerjee, A. & Malik, S., 2012. "The changing role of expectations in US monetary policy: A new look using the Livingston Survey," Working papers, Banque de France 376, Banque de France.
  11. Nikolay Hristov & Oliver Hülsewig & Thomas Siemsen & Timo Wollmershäuser, 2014. "Smells Like Fiscal Policy? Assessing the Potential Effectiveness of the ECB's OMT Program," CESifo Working Paper Series 4628, CESifo Group Munich.
  12. 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, Elsevier, vol. 21(4), pages 461-495, October.
  13. Ikram Jebabli & Mohamed Arouri & Frédéric Teulon, 2014. "On the effects of world stock market and oil price shocks on food prices: An empirical investigation based on TVPVAR models with stochastic volatility," Working Papers, Department of Research, Ipag Business School 2014-209, Department of Research, Ipag Business School.
  14. Jun-Hyung Ko & Hiroshi Morita, 2013. "Regime Switches in Japanese Fiscal Policy: Markov-Switching VAR Approach," Global COE Hi-Stat Discussion Paper Series, Institute of Economic Research, Hitotsubashi University gd12-270, Institute of Economic Research, Hitotsubashi University.
  15. Arratibel, Olga & Michaelis, Henrike, 2013. "The Impact of Monetary Policy and Exchange Rate Shocks in Poland: Evidence from a Time-Varying VAR," Discussion Papers in Economics, University of Munich, Department of Economics 21088, University of Munich, Department of Economics.
  16. Masahiko Shibamoto, 2014. "Source of Underestimation of Monetary Policy Effect: Re-examination of the Policy Effectiveness in Japan's 1990s," Discussion Paper Series, Research Institute for Economics & Business Administration, Kobe University DP2014-10, Research Institute for Economics & Business Administration, Kobe University.
  17. Ko, Jun-Hyung & Murase, Koichi, 2013. "Great Moderation in the Japanese economy," Japan and the World Economy, Elsevier, Elsevier, vol. 27(C), pages 10-24.
  18. Michal Franta, 2011. "Identification of Monetary Policy Shocks in Japan Using Sign Restrictions within the TVP-VAR Framework," IMES Discussion Paper Series, Institute for Monetary and Economic Studies, Bank of Japan 11-E-13, Institute for Monetary and Economic Studies, Bank of Japan.
  19. Arratibel, Olga & Michaelis, Henrike, 2014. "The impact of monetary policy and exchange rate shocks in Poland: evidence from a time-varying VAR," Working Paper Series, European Central Bank 1636, European Central Bank.

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