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The Bank of Japan's operating procedures and the identification of monetary policy shocks: A reexamination using the Bernanke-Mihov approach

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  • Nakashima, Kiyotaka

Abstract

This paper reexamines the operating procedures of the Bank of Japan (BOJ) and identifies the monetary policy shock up to June 1995 by employing the structural VAR approach of Bernanke and Mihov (1998). This approach identifies exogenous components of monetary policy by setting up equilibrium models of the reserve market. In this way, it presents two equilibrium models, the Implicit Cost (IC) model and the Credit Rationing (CR) model, which are distinguished by opposing views about the BOJ's discount-window borrowing policy. The IC model has the feature that the BOJ endogenously accommodates the demand for discount-window borrowing by private banks. In contrast, the CR model has the feature that the BOJ exogenously controls the level of discount-window lending. This paper demonstrates that the CR model is superior to the IC model in describing the BOJ's operating procedures up to June 1995.
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  • 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.
    • Handle: RePEc:eee:jjieco:v:20:y:2006:i:3:p:406-433
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    5. Shin-ichi Fukuda, 2010. "The Rise of China and the Sustained Recovery of Japan," Chapters, in: Takatoshi Ito & Chin Hee Hahn (ed.), The Rise of China and Structural Changes in Korea and Asia, chapter 9, Edward Elgar Publishing.
    6. Kiyotaka Nakashima & Masahiko Shibamoto & Koji Takahashi, 2019. "Identifying Quantitative and Qualitative Monetary Policy Shocks," Discussion Paper Series DP2019-09, Research Institute for Economics & Business Administration, Kobe University, revised Mar 2023.
    7. Harada, Nobuyuki & Kageyama, Noriyuki, 2011. "Bankruptcy dynamics in Japan," Japan and the World Economy, Elsevier, vol. 23(2), pages 119-128, March.
    8. Lodge, David & Manu, Ana-Simona, 2022. "EME financial conditions: Which global shocks matter?," Journal of International Money and Finance, Elsevier, vol. 120(C).
    9. Olivei, Giovanni & Tenreyro, Silvana, 2007. "Synchronization in wage setting and the effects of monetary policy," LSE Research Online Documents on Economics 4990, London School of Economics and Political Science, LSE Library.
    10. Kiyotaka Nakashima & Masahiko Shibamoto & Koji Takahashi, 2017. "Identifying Unconventional Monetary Policy Shocks," Discussion Paper Series DP2017-05, Research Institute for Economics & Business Administration, Kobe University, revised Apr 2017.
    11. Nicolaas Groenewold, 2012. "Australia and the GFC: Saved by Astute Fiscal Policy?," Economics Discussion / Working Papers 12-28, The University of Western Australia, Department of Economics.
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    13. Amarasekara, Chandranath, 2008. "The Impact of Monetary Policy on Economic Growth and Inflation in Sri Lanka," MPRA Paper 64866, University Library of Munich, Germany.
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    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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