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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

  • Nakashima, Kiyotaka

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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Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

Volume (Year): 20 (2006)
Issue (Month): 3 (September)
Pages: 406-433

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Handle: RePEc:eee:jjieco:v:20:y:2006:i:3:p:406-433
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622903

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  1. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 1994. "The effects of monetary policy shocks: evidence from the flow of funds," Proceedings, Federal Reserve Bank of Dallas, issue Apr.
  2. Leeper, Eric M. & Gordon, David B., 1992. "In search of the liquidity effect," Journal of Monetary Economics, Elsevier, vol. 29(3), pages 341-369, June.
  3. Shioji, Etsuro, 1997. "Identifying Monetary Policy Shocks in Japan," CEPR Discussion Papers 1733, C.E.P.R. Discussion Papers.
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  8. Miyao, Ryuzo, 2002. "The Effects of Monetary Policy in Japan," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 376-92, May.
  9. Nakashima, Kiyotaka, 2006. "Ideal and Real Japanese Monetary Policy: A Comparative Analysis of Actual and Optimal Policy Measures," MPRA Paper 70688, University Library of Munich, Germany.
  10. David B. Gordon & Eric M. Leeper, 1992. "The dynamic impacts of monetary policy: an exercise in tentative identification," FRB Atlanta Working Paper 92-13, Federal Reserve Bank of Atlanta.
  11. Bernanke, Ben S. & Mihov, Ilian, 1995. "Measuring Monetary Policy," Economics Series 10, Institute for Advanced Studies.
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  14. Strongin, Steven, 1995. "The identification of monetary policy disturbances explaining the liquidity puzzle," Journal of Monetary Economics, Elsevier, vol. 35(3), pages 463-497, June.
  15. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1996. "Sticky Price and Limited Participation Models of Money: A Comparison," NBER Working Papers 5804, National Bureau of Economic Research, Inc.
  16. 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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  18. Miyao, Ryuzo, 2000. "The Role of Monetary Policy in Japan: A Break in the 1990s?," Journal of the Japanese and International Economies, Elsevier, vol. 14(4), pages 366-384, December.
  19. 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.
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