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An Analysis Of Monetary Policy Shocks In Japan: A Factor Augmented Vector Autoregressive Approach

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  • MASAHIKO SHIBAMOTO

Abstract

This paper analyses monetary policy shocks in Japan using a factor augmented vector autoregressive approach. There are three main findings. First, the time lags with which the monetary policy shocks are transmitted vary between the various macroeconomic time series. These include several series that have not been included thus far in standard vector autoregressive analysis, including housing starts and employment indices. Second, a coherent picture of monetary policy effects on the economy is obtained. Third, it is found that monetary policy shocks have a stronger impact on real variables, such as employment and housing starts, than industrial production.

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  • Masahiko Shibamoto, 2007. "An Analysis Of Monetary Policy Shocks In Japan: A Factor Augmented Vector Autoregressive Approach," The Japanese Economic Review, Japanese Economic Association, vol. 58(4), pages 484-503, December.
    • Handle: RePEc:bla:jecrev:v:58:y:2007:i:4:p:484-503
    DOI: 10.1111/j.1468-5876.2007.00392.x
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    1. James H. Stock & Mark W. Watson, 2005. "Implications of Dynamic Factor Models for VAR Analysis," NBER Working Papers 11467, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Miyazaki, Tomomi & Hiraga, Kazuki & Kozuka, Masafumi, 2024. "Stock market response to public investment under the zero lower bound: Cross-industry evidence from Japan," Journal of the Japanese and International Economies, Elsevier, vol. 71(C).
    2. Kashif Munir & Abdul Qayyum, 2014. "Measuring the effects of monetary policy in Pakistan: a factor-augmented vector autoregressive approach," Empirical Economics, Springer, vol. 46(3), pages 843-864, May.
    3. IIBOSHI Hirokuni, 2012. "Measuring the Effects of Monetary Policy: A DSGE-DFM Approach," ESRI Discussion paper series 292, Economic and Social Research Institute (ESRI).
    4. Yoshiki Nakajima & Naoya Sueishi, 2022. "Forecasting the Japanese macroeconomy using high-dimensional data," The Japanese Economic Review, Springer, vol. 73(2), pages 299-324, April.
    5. Giuliano Queiroz Ferreira & Leonardo Bornacki Mattos, 2022. "Regime-dependent price puzzle in the Brazilian economy: evidence from VAR and FAVAR approaches," SN Business & Economics, Springer, vol. 2(9), pages 1-28, September.
    6. Petrovska Magdalena & Tonovska Jasna & Nikolov Miso & Sulejmani Artan, 2022. "Evaluating Monetary Policy Effectiveness in North Macedonia: Evidence from a Bayesian Favar Framework," South East European Journal of Economics and Business, Sciendo, vol. 17(2), pages 67-82, December.
    7. Moussa, Zakaria, 2010. "The Japanese Quantitative Easing Policy under Scrutiny: A Time-Varying Parameter Factor-Augmented VAR Model," MPRA Paper 29429, University Library of Munich, Germany.
    8. Pang, Iris Ai Jao, 2010. "Were Fed’s active monetary policy actions necessary?," MPRA Paper 32496, University Library of Munich, Germany.
    9. Matsumoto, Ryo & Morita, Hiroshi & Ono, Taiki, 2022. "Central Bank Information Effects in Japan : The Role of Uncertainty Channel," Discussion paper series HIAS-E-126, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    10. Ansgar Belke & Thomas Osowski, 2019. "International Effects Of Euro Area Versus U.S. Policy Uncertainty: A Favar Approach," Economic Inquiry, Western Economic Association International, vol. 57(1), pages 453-481, January.
    11. Masahiko Shibamoto, 2016. "Source of Underestimation of the Monetary Policy Effect: Re-Examination of the Policy Effectiveness in Japan's 1990s," Manchester School, University of Manchester, vol. 84(6), pages 795-810, December.
    12. Hiroshi Morita & Ryo Matsumoto & Taiki Ono, 2025. "Central bank information effects in Japan: the role of uncertainty channel," Empirical Economics, Springer, vol. 68(2), pages 855-877, February.
    13. Masafumi Kozuka, 2014. "Policy Duration Effects, Quantitative Monetary Easing Policy and Economic Growth: Evidence from Japanese Time Series Data," Discussion Papers 1410, Graduate School of Economics, Kobe University.
    14. Sigal Ribon, 2011. "The Effect of Monetary Policy on Inflation: A Factor Augmented VAR Approach using disaggregated data," Bank of Israel Working Papers 2011.12, Bank of Israel.
    15. Harada, Nobuyuki & Kageyama, Noriyuki, 2011. "Bankruptcy dynamics in Japan," Japan and the World Economy, Elsevier, vol. 23(2), pages 119-128, March.
    16. Kashif Munir, 2020. "Effectiveness of Monetary Policy on Money and Credit in Pakistan," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 14(2), June.
    17. Hanisch, Max, 2017. "The effectiveness of conventional and unconventional monetary policy: Evidence from a structural dynamic factor model for Japan," Journal of International Money and Finance, Elsevier, vol. 70(C), pages 110-134.
    18. Fujii, Takao & Hiraga, Kazuki & Kozuka, Masafumi, 2013. "Effects of public investment on sectoral private investment: A factor augmented VAR approach," Journal of the Japanese and International Economies, Elsevier, vol. 27(C), pages 35-47.
    19. Pang, Iris Ai Jao, 2010. "Forecasting Hong Kong economy using factor augmented vector autoregression," MPRA Paper 32495, University Library of Munich, Germany.
    20. Takao Fujii & Kazuki Hiraga & Masafumi Kozuka, 2012. "Analyses of Public Investment Shock in Japan: Factor Augmented Vector Autoregressive Approach," Keio/Kyoto Joint Global COE Discussion Paper Series 2012-006, Keio/Kyoto Joint Global COE Program.
    21. Blaes, Barno, 2009. "Money and monetary policy transmission in the euro area: evidence from FAVAR- and VAR approaches," Discussion Paper Series 1: Economic Studies 2009,18, Deutsche Bundesbank.

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