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Specification and Analysis of a Monetary Policy Rule for Japan

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Author Info
Bennett T. McCallum

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Abstract

This paper investigates the performance, in several small-scale models of the Japanese economy, of an operational monetary policy rule related to ones previously considered for the United States. The rule dictates settings of the monetary base that are designed to produce values of nominal GNP close to targets that grow smoothly at a noninflationary rate. Simulations with quarterly data for the period 1972-1992 yield predominantly favorable results. Experiments with an interest rate instrument are also conducted but the simulated performance is less desirable. One section discusses issues concerning monetary base control in Japan.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4449.

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Date of creation: Mar 1994
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Handle: RePEc:nbr:nberwo:4449

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Find related papers by JEL classification:
E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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  1. Mccallum, Bennet T., 1988. "Robustness properties of a rule for monetary policy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 29(1), pages 173-203, January. [Downloadable!] (restricted)
  2. McCallum, Bennett T & Hoehn, James G, 1983. "Instrument Choice for Money Stock Control with Contemporaneous and Lagged Reserve Requirements: A Note," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 15(1), pages 96-101, February. [Downloadable!] (restricted)
  3. Kazuo Ueda, 1993. "A Comparative Perspective on Japanese Monetary Policy: Short-Run Monetary Control and the Transmission Mechanism," NBER Chapters, in: Japanese Monetary Policy, pages 7-30 National Bureau of Economic Research, Inc. [Downloadable!]
  4. Bean, Charles R, 1983. "Targeting Nominal Income: An Appraisal," Economic Journal, Royal Economic Society, vol. 93(372), pages 806-19, December. [Downloadable!] (restricted)
  5. R.W. Hafer & Joseph H. Haslag & Scott E. Hein, 1991. "Evaluating monetary base targeting rules," Research Paper 9104, Federal Reserve Bank of Dallas. [Downloadable!]
  6. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November. [Downloadable!] (restricted)
    Other versions:
  7. Martin Feldstein & James H. Stock, 1993. "The Use of Monetary Aggregate to Target Nominal GDP," NBER Working Papers 4304, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Barro, Robert J, 1977. "Unanticipated Money Growth and Unemployment in the United States," American Economic Review, American Economic Association, vol. 67(2), pages 101-15, March.
    Other versions:
  9. repec:fip:fedreq:y:1983:i:mar:p:3-21:n:v.69no.2 is not listed on IDEAS
  10. Marvin Goodfriend & Monica Hargraves, 1983. "A historical assessment of the rationales and functions of reserve requirements," Working Paper 83-01, Federal Reserve Bank of Richmond. [Downloadable!]
  11. John P. Judd & Brian Motley, 1991. "Nominal feedback rules for monetary policy," Economic Review, Federal Reserve Bank of San Francisco, issue Sum, pages 3-17. [Downloadable!]
  12. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April. [Downloadable!] (restricted)
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. Richard CK Burdekin & Ilan Noy, 2005. "What Has Driven Chinese Monetary Policy Since 1990? Investigating the People's Bank's Policy Rule," Economics Study Area Working Papers 85, East-West Center, Economics Study Area. [Downloadable!]
  2. Richard G. Anderson & Robert H. Rasche & Jeffrey Loesel, 2003. "A reconstruction of the Federal Reserve Bank of St. Louis adjusted monetary base and reserves," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 39-69. [Downloadable!]
  3. Michael Dueker & Andreas M. Fischer, 1995. "Identifying Austria's implicit monetary target: an alternative test of the "hard currency" policy," Working Papers 1995-005, Federal Reserve Bank of St. Louis. [Downloadable!]
  4. Laurence Ball, 1997. "Efficient rules for monetary policy," Reserve Bank of New Zealand Discussion Paper Series G97/3, Reserve Bank of New Zealand. [Downloadable!]
    Other versions:
  5. Bennett T. McCallum & Edward Nelson, 2000. "Nominal Income Targeting in an Open-Economy Optimizing Model," NBER Working Papers 6675, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Bennett T. McCallum, 1996. "The sensitivity of empirical studies to alternative measures of the monetary base and reserves - commentary," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 73-75. [Downloadable!]
  7. Michael Dueker & Andreas M. Fischer, 1995. "Inflation targeting in a small open economy: empirical results for Switzerland," Working Papers 1995-014, Federal Reserve Bank of St. Louis. [Downloadable!]
    Other versions:
  8. Bennett T. McCallum & Edward Nelson, 1998. "Performance of Operational Policy Rules in an Estimated Semi-Classical Structural Model," NBER Working Papers 6599, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  9. Robert Rasche, 1995. "Pitfalls in counterfactual analyses of policy rules," Open Economies Review, Springer, vol. 6(3), pages 199-202, July. [Downloadable!] (restricted)
  10. Michael Dueker & Gyuhan Kim, 1998. "A monetary policy feedback rule in Korea's fast-growing economy," Working Papers 1998-014, Federal Reserve Bank of St. Louis. [Downloadable!]
    Other versions:
  11. Danfeng Kong & Osamu Kamoike, . "The stability condition of a forward looking Taylor rule," EAERG Discussion Paper Series 0705, School of Economics, University of Queensland, Australia. [Downloadable!]
  12. Athanasios Orphanides, 2007. "Taylor rules," Finance and Economics Discussion Series 2007-18, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  13. Menzie D. Chinn & Michael P. Dooley, 1997. "Monetary Policy in Japan, Germany and the United States: Does One Size Fit All?," NBER Working Papers 6092, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Nicoletta Batini & Anthony Yates, . "Hybrid inflation and price level targeting," Bank of England working papers 135, Bank of England. [Downloadable!]
    Other versions:
  15. Michael J. Dueker & Andreas M. Fischer, 2006. "Do inflation targeters outperform non-targeters?," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 431-450. [Downloadable!]
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