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Monetary Policy in Japan, Germany and the United States: Does One Size Fit All?

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Author Info
Menzie D. Chinn
Michael P. Dooley

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Abstract

We study the post-war evidence for Japan to see if the same specification for both the economy and the monetary policy rule is useful for understanding Japan's economy and monetary policy. A recurrent theme in the literature on Japanese monetary policy is that there are significant differences in both the policy procedures and objectives as compared to other industrial countries. In this paper we propose an out of sample' test of a set of restrictions on a vector autoregression employed by Clarida and Gertler (1997) in their analysis of the Bundesbank's behavior. Our interpretation of the evidence is that, with minor adjustments, the same specification provides a useful framework for understanding monetary policy in Japan. Perhaps the most interesting finding is that the Bank of Japan appears to react to inflation over longer forecast horizons as compared to other central banks.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6092.

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Date of creation: Jul 1997
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Handle: RePEc:nbr:nberwo:6092

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Find related papers by JEL classification:
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Determination of Interest Rates; Term Structure of Interest Rates

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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. Gali, Jordi, 1992. "How Well Does the IS-LM Model Fit Postwar U.S. Data," The Quarterly Journal of Economics, MIT Press, vol. 107(2), pages 709-38, May. [Downloadable!] (restricted)
  2. Carl E. Walsh, 1993. "What caused the 1990-1991 recession?," Economic Review, Federal Reserve Bank of San Francisco, pages 33-48. [Downloadable!]
  3. Ben S. Bernanke & Ilian Mihov, 1995. "Measuring monetary policy," Working Papers in Applied Economic Theory 95-09, Federal Reserve Bank of San Francisco.
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  4. Richard H. Clarida & Mark Gertler, 1997. "How the Bundesbank Conducts Monetary Policy," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 363-412 National Bureau of Economic Research, Inc. [Downloadable!]
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  5. Menzie Chinn & Michael Dooley, 1995. "Asia-Pacific Capital Markets: Measurement of Integration and the Implications for Economic Activity," NBER Working Papers 5280, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Reuven Glick & Michael Hutchison, 1992. "Monetary policy, intervention, and exchange rates in Japan," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
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  7. Taylor, John B., 1993. "Discretion versus policy rules in practice," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 195-214, December. [Downloadable!] (restricted)
  8. Kenneth Kasa & Helen Popper, 1995. "Monetary policy in Japan: a structural VAR analysis," Pacific Basin Working Paper Series 95-12, Federal Reserve Bank of San Francisco.
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  9. Bennett T. McCallum, 1994. "Specification and Analysis of a Monetary Policy Rule for Japan," NBER Working Papers 4449, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Pierce, James L, 1984. "Did Financial Innovation Hurt the Great Monetarist Experiment?," American Economic Review, American Economic Association, vol. 74(2), pages 392-96, May. [Downloadable!] (restricted)
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(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. Andrew Levin & Volker Wieland & John C. Williams, 2003. "The Performance of Forecast-Based Monetary Policy Rules under Model Uncertainty," CFS Working Paper Series 2003/06, Center for Financial Studies. [Downloadable!]
    Other versions:
  2. Mingwei Yuan & Christian Zimmermann, 2000. "Financial Intermediation with Heterogeneous Projects: An Application to the Japanese Credit Crunch," Cahiers de recherche CREFE / CREFE Working Papers 115, CREFE, Université du Québec à Montréal. [Downloadable!]
  3. Stephanie Guichard, 1998. "La politique monetaire et la crise japonaise," Working Papers 1998-06, CEPII research center. [Downloadable!]
  4. Kevin X.D. Huang & Qinglai Meng, 2007. "Distance to Frontier and the Big Swings of the Unemployment Rate: What Room is Left for Monetary Policy?," Kiel Working Papers 1348, Kiel Institute for the World Economy. [Downloadable!]
  5. Kevin X.D. Huang & Qinglai Meng, 2007. "Is Forward-Looking Inflation Targeting Destabilizing? The Role of Policy's Response to Current Output under Endogenous Investment," Working Papers 0704, Department of Economics, Vanderbilt University. [Downloadable!]
  6. Muscatelli, V. Anton & Tirelli, Patrizio & Trecroci, Carmine, 2000. "Does Institutional Change Really Matter? Inflation Targets, Central Bank Reform and Interest Rate Policy in the OECD Countries," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  7. V. Anton Muscatelli & Patrizio Tirelli & Carmine Trecroci, 1998. "Institutional Change, Inflation Targeting and the Stability of Interest Rate Reaction Functions," Working Papers 9815, Department of Economics, University of Glasgow, revised Aug 1998. [Downloadable!]
    Other versions:
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