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Ideal And Real Japanese Monetary Policy: A Comparative Analysis Of Actual And Optimal Policy Measures

  • KIYOTAKA NAKASHIMA

This paper discusses the successes and failures of Japanese monetary policy by evaluating policies from January 1980 to May 2003 in the light of optimal policy rules. First, we quantitatively conceptualize the Bank of Japan (BOJ)'s policy decisions by employing Bernanke and Mihov's (1998) econometric methodology for developing monetary-policy measures, and term the resulting policy measure the `actual policy measure'. Next, assuming that the BOJ is committed to optimal policy rules, we simulate optimal policy paths, which we term `optimal policy measures'. We evaluate Japanese monetary policy historically by comparing actual and optimal policy measures.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-5876.2008.00415.x
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Article provided by Japanese Economic Association in its journal Japanese Economic Review.

Volume (Year): 59 (2008)
Issue (Month): 3 ()
Pages: 345-369

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Handle: RePEc:bla:jecrev:v:59:y:2008:i:3:p:345-369
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  1. Glenn D. Rudebusch & Lars E. O. Svensson, 1998. "Policy rules for inflation targeting," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  2. Thomas Laubach & John C. Williams, 2001. "Measuring the natural rate of interest," Finance and Economics Discussion Series 2001-56, Board of Governors of the Federal Reserve System (U.S.).
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  7. Donald W.K. Andrews & Werner Ploberger, 1992. "Optimal Tests When a Nuisance Parameter Is Present Only Under the Alternative," Cowles Foundation Discussion Papers 1015, Cowles Foundation for Research in Economics, Yale University.
  8. Kazuo Ueda, 1993. "A Comparative Perspective on Japanese Monetary Policy: Short-Run Monetary Control and the Transmission Mechanism," NBER Chapters, in: Japanese Monetary Policy, pages 7-30 National Bureau of Economic Research, Inc.
  9. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," CEPR Discussion Papers 1908, C.E.P.R. Discussion Papers.
  10. Svensson, Lars E.O., 1997. "Inflation Forecast Targeting: Implementing and Monitoring Inflation Targets," Seminar Papers 615, Stockholm University, Institute for International Economic Studies.
  11. Bruce E. Hansen, 1995. "Approximate Asymptotic P-Values for Structural Change Tests," Boston College Working Papers in Economics 297., Boston College Department of Economics.
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  13. 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.
  14. Nakashima, Kiyotaka, 2006. "The Bank of Japan's operating procedures and the identification of monetary policy shocks: A reexamination using the Bernanke-Mihov approach," Journal of the Japanese and International Economies, Elsevier, vol. 20(3), pages 406-433, September.
  15. Ryuzo Miyao, 2005. "Use Of The Money Supply In The Conduct Of Japan'S Monetary Policy: Re-Examining The Time-Series Evidence," The Japanese Economic Review, Japanese Economic Association, vol. 56(2), pages 165-187.
  16. Sack, Brian, 2000. "Does the fed act gradually? A VAR analysis," Journal of Monetary Economics, Elsevier, vol. 46(1), pages 229-256, August.
  17. Arturo Estrella & Jeffrey C. Fuhrer, 2003. "Monetary Policy Shifts and the Stability of Monetary Policy Models," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 94-104, February.
  18. John B. Taylor, 1998. "An Historical Analysis of Monetary Policy Rules," NBER Working Papers 6768, National Bureau of Economic Research, Inc.
  19. Ben S. Bernanke & Ilian Mihov, 1998. "Measuring Monetary Policy," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 869-902.
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