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Macroeconomic effects of monetary policy in Japan: an analysis using interest rate futures surprises

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  • Hiroyuki Kubota

    (University of California, Los Angeles)

  • Mototsugu Shintani

    (The University of Tokyo)

Abstract

We estimate the effects of monetary policy on the aggregate economy in Japan during the last three decades when the effective lower bound (ELB) on interest rates was occasionally binding. We use monetary policy surprises from the interest rate futures market as the external instrument to identify monetary policy shocks in the vector autoregressive model. We find that monetary policy has been effective in Japan during the last three decades, and the effect was more persistent in the ELB regime than in the non-ELB regime. In a simulation exercise, we further show that a New Keynesian model with forward guidance can replicate our empirical finding.

Suggested Citation

  • Hiroyuki Kubota & Mototsugu Shintani, 2025. "Macroeconomic effects of monetary policy in Japan: an analysis using interest rate futures surprises," Empirical Economics, Springer, vol. 68(2), pages 783-801, February.
    • Handle: RePEc:spr:empeco:v:68:y:2025:i:2:d:10.1007_s00181-024-02654-4
    DOI: 10.1007/s00181-024-02654-4
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    More about this item

    Keywords

    Unconventional monetary policy; High-frequency identification; Structural vector autoregressive models; External instruments; Effective lower bound;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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