This paper investigates whether the Bank of Japan has practiced a monetarist rule since 1975. The Bank of Japan (BOJ) published a report in 1975, stating that it would pay close attention to money supply (M2), and in 1978 started announcing quarterly the "forecast" (targets) of monetary (M2) growth rate. Since 1975. the monetary growth rate has gradually declined, and inflation has subsided without causing a major fluctuation in output. This seems to be a successful case of the monetarist experiment. Has the EOJ practiced a monetarist rule, i.e., an announcement and maintenance of the K2 growth target? This paper reveals that it has not. The BOJ "forecasts" were quite accommodative in that an unexpected increase in actual money supply would make "forecasts" to allow a further increase in money supply. In other words, a "forecast" did not behave like a "target" under a strict monetarist rule. Testing a monetarist rule with "forecasts" is shown to be more powerful than testing with the actual process, under some weak assumptions. One of the necessary assumptions is that "forecasts" are rational expectations, and the rational expectations hypothesis is not rejected by the data. Thus, the conclusion of this paper is negative to a question posed by its title. Takatoshi
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Publisher Info
Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
2879.
Length: Date of creation: Mar 1989 Date of revision: Handle: RePEc:nbr:nberwo:2879
Note: ME Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A. Phone: 617-868-3900 Email: Web page: http://www.nber.org More information through EDIRC
For technical questions regarding this item, or to correct its listing, contact: ().
Related research
Keywords:
Other versions of this item:
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.:
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.)