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

Listed author(s):
  • 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 Rudebusch & Lars E.O. Svensson, 1999. "Policy Rules for Inflation Targeting," NBER Chapters, in: Monetary Policy Rules, pages 203-262 National Bureau of Economic Research, Inc.
  2. Etsuro Shioji, 1997. "Identifying monetary policy shocks in Japan," Economics Working Papers 216, Department of Economics and Business, Universitat Pompeu Fabra.
  3. Thomas Laubach and John C. Williams, 2001. "Measuring the Natural Rate of Interest," Computing in Economics and Finance 2001 35, Society for Computational Economics.
  4. Nakashima, Kiyotaka, 2005. "The Bank of Japan's Operating Procedures and the Identification of Monetary Policy Shocks: A Reexamination using the Bernanke-Mihov Approach," MPRA Paper 70687, University Library of Munich, Germany.
  5. Sack, Brian, 2000. "Does the fed act gradually? A VAR analysis," Journal of Monetary Economics, Elsevier, vol. 46(1), pages 229-256, August.
  6. Kasa, Ken & Popper, Helen, 1997. "Monetary Policy in Japan: A Structural VAR Analysis," Journal of the Japanese and International Economies, Elsevier, vol. 11(3), pages 275-295, September.
  7. Clarida, Richard & Galí, Jordi & Gertler, Mark, 1997. "Monetary Policy Rules in Practice: Some International Evidence," CEPR Discussion Papers 1750, C.E.P.R. Discussion Papers.
  8. Glenn D. Rudebusch, 2002. "Assessing the Lucas critique in monetary policy models," Working Paper Series 2002-02, Federal Reserve Bank of San Francisco.
  9. 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.
  10. Svensson, Lars E. O., 1997. "Inflation forecast targeting: Implementing and monitoring inflation targets," European Economic Review, Elsevier, vol. 41(6), pages 1111-1146, June.
  11. 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.
  12. Clarida, R. & Gali, J. & Gertler, M., 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and some Theory," Working Papers 98-01, C.V. Starr Center for Applied Economics, New York University.
  13. Donald W.K. Andrews, 1990. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Cowles Foundation Discussion Papers 943, Cowles Foundation for Research in Economics, Yale University.
  14. Ben S. Bernanke & Ilian Mihov, 1998. "Measuring Monetary Policy," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 869-902.
  15. 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.
  16. Bruce E. Hansen, 1995. "Approximate Asymptotic P-Values for Structural Change Tests," Boston College Working Papers in Economics 297., Boston College Department of Economics.
  17. John B. Taylor, 1999. "A Historical Analysis of Monetary Policy Rules," NBER Chapters, in: Monetary Policy Rules, pages 319-348 National Bureau of Economic Research, Inc.
  18. Richard H. Clarida & Jordi Gali & Mark Gertler, 1998. "Monetary policy rules in practice," Proceedings, Federal Reserve Bank of San Francisco, issue Mar, pages -.
  19. 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.
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