An Injection Of Base Money At Zero Interest Rates: Empirical Evidence From The Japanese Experience 2001-2006
AbstractMany 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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Bibliographic InfoPaper 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.
Length: 39 pages
Date of creation: Mar 2007
Date of revision:
Quantitative easing; Money injection; Portfolio rebalancing; Stock price channel; Vector autoregression;
Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-06-11 (All new papers)
- NEP-CBA-2007-06-11 (Central Banking)
- NEP-MAC-2007-06-11 (Macroeconomics)
- NEP-MON-2007-06-11 (Monetary Economics)
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- 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.
- Schenkelberg, Heike & Watzka, Sebastian, 2013. "Real effects of quantitative easing at the zero lower bound: Structural VAR-based evidence from Japan," Journal of International Money and Finance, Elsevier, vol. 33(C), pages 327-357.
- 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).
- 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).
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