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An Injection Of Base Money At Zero Interest Rates: Empirical Evidence From The Japanese Experience 2001-2006

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Author Info

  • Yuzo Honda

    (School of Economics, Osaka University)

  • Yoshihiro Kuroki

    (Chuo University)

  • Minoru Tachibana

    (Osaka Prefecture University)

Abstract

Many macroeconomists and policymakers have debated the effectiveness of the quantitative monetary-easing policy (QMEP) that was introduced in Japan in 2001. This paper measures the effect of the QMEP on aggregate output and prices, and examines its transmission mechanism, based on the vector autoregressive (VAR) methodology. To ascertain the transmission mechanism, we include several financial market variables in the VAR system. The results show that the QMEP increased aggregate output through the stock price channel. This evidence suggests that further injection of base money is effective even when short-term nominal interest rates are at zero.

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File URL: http://www2.econ.osaka-u.ac.jp/library/global/dp/0708.pdf
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Bibliographic Info

Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 07-08.

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Length: 39 pages
Date of creation: Mar 2007
Date of revision:
Handle: RePEc:osk:wpaper:0708

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Web page: http://www.econ.osaka-u.ac.jp/
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Related research

Keywords: Quantitative easing; Money injection; Portfolio rebalancing; Stock price channel; Vector autoregression;

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Cited by:
  1. Kazuo Ueda, 2012. "Deleveraging and Monetary Policy: Japan since the 1990s and the United States since 2007," CARF F-Series CARF-F-283, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  2. Watzka, Sebastian & Schenkelberg, Heike, 2011. "Real effects of Quantitative Easing at the Zero-Lower Bound: Structural VAR-based evidence from Japan," Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48687, Verein für Socialpolitik / German Economic Association.
  3. Fumio Hayashi & Junko Koeda, 2013. "A Regime-Switching SVAR Analysis of Quantitative Easing," CARF F-Series CARF-F-322, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  4. Stefan Behrendt, 2013. "Monetary Transmission via the Central Bank Balance Sheet," Global Financial Markets Working Paper Series 49-2013, Friedrich-Schiller-University Jena.
  5. Kazuo Ueda, 2011. "Japanfs Deleveraging since the 1990s and the Bank of Japanfs Monetary Policy: Some Comparisons with the U.S. Experience since 2007," CARF F-Series CARF-F-259, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  6. Yuzo Honda, 2013. "The Effectiveness Of Nontraditional Monetary Policy: The Case Of Japan," Discussion Papers in Economics and Business 13-25, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  7. Yuzo Honda & Minoru Tachibana, 2012. "Tobinfs q as a transmission channel for nontraditional monetary policy: The case of Japan," Discussion Papers in Economics and Business 12-16, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  8. Yoshito Funashima, 2012. "The effects of public investment smoothing as a stimulus measure on construction industry in Japan," Economics Bulletin, AccessEcon, vol. 32(3), pages 1992-2006.

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