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Unconventional Monetary Policy and its External Effects: Evidence from Japan's Exports

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  • Shin-ichi Fukuda
  • Tsutomu Doita

Abstract

type="main"> After Prime Minister Abe advocated a new policy regime, the Japanese yen depreciated substantially, yet Japan's exports did not show significant improvement. To explain this, the paper focuses on external demand and overseas production. Our model shows that a small change in the exchange rate has no effect on exports because of the fixed costs associated with shifting the plant location to other countries. It also implies that a change in the exchange rate has a significant effect on exports either when depreciation coincides with strong external demand or when appreciation coincides with weak external demand. We examine the validity of these theoretical implications through estimating a simple export function in Japan and calibrating our export function. Both of the experiments confirm that the model can track Japan's exports reasonably well, especially after the new policy regime started.

Suggested Citation

  • Shin-ichi Fukuda & Tsutomu Doita, 2016. "Unconventional Monetary Policy and its External Effects: Evidence from Japan's Exports," The Developing Economies, Institute of Developing Economies, vol. 54(1), pages 59-79, March.
  • Handle: RePEc:bla:deveco:v:54:y:2016:i:1:p:59-79
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    File URL: http://hdl.handle.net/10.1111/deve.12094
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    References listed on IDEAS

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    1. John H. Rogers & Chiara Scotti & Jonathan H. Wright, 2014. "Evaluating asset-market effects of unconventional monetary policy: a multi-country review," Economic Policy, CEPR;CES;MSH, vol. 29(80), pages 749-799, October.
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    11. Mitsuyo ANDO & Fukunari KIMURA, 2012. "How Did the Japanese Exports Respond to Two Crises in the International Production Network?: The Global Financial Crisis and the East Japan Earthquake," Working Papers DP-2012-01, Economic Research Institute for ASEAN and East Asia (ERIA).
    12. Neely, Christopher J., 2015. "Unconventional monetary policy had large international effects," Journal of Banking & Finance, Elsevier, vol. 52(C), pages 101-111.
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    14. Rogers, John H. & Scotti, Chiara & Wright, Jonathan H., 2014. "Evaluating Asset-Market Effects of Unconventional Monetary Policy: A Cross-Country Comparison," International Finance Discussion Papers 1101, Board of Governors of the Federal Reserve System (U.S.).
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    Cited by:

    1. Fukuda, Shin-ichi, 2017. "Spillover Effects of Japan’s Quantitative and Qualitative Easing on East Asian Economies," ADBI Working Papers 631, Asian Development Bank Institute.
    2. repec:eee:jjieco:v:46:y:2017:i:c:p:1-16 is not listed on IDEAS

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