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A Peek Inside the Black Box; The Monetary Transmission Mechanism in Japan


  • Tamim Bayoumi
  • James Morsink


This paper uses vector autoregressions to examine the monetary transmission mechanism in Japan. The empirical results indicate that both monetary policy and banks’ balance sheets are important sources of shocks, that banks play a crucial role in transmitting monetary shocks to economic activity, that corporations and households have not been able to substitute borrowing from other sources for a shortfall in bank borrowing, and that business investment is especially sensitive to monetary shocks. We conclude that policy measures to strengthen banks are probably a prerequisite for restoring the effectiveness of the monetary transmission mechanism.

Suggested Citation

  • Tamim Bayoumi & James Morsink, 1999. "A Peek Inside the Black Box; The Monetary Transmission Mechanism in Japan," IMF Working Papers 99/137, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:99/137

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    References listed on IDEAS

    1. Gordon, Roger H. & Varian, Hal R., 1989. "Taxation of asset income in the presence of a world securities market," Journal of International Economics, Elsevier, vol. 26(3-4), pages 205-226, May.
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    4. Claessens, Stijn, 1995. "The Emergence of Equity Investment in Developing Countries: Overview," World Bank Economic Review, World Bank Group, vol. 9(1), pages 1-17, January.
    5. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    6. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    7. Myers, Stewart C, 1984. " The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-592, July.
    8. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
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    More about this item


    Demand; Japan; Private sector; Monetary transmission mechanism; bank behavior; bank loans; monetary policy; monetary transmission; bank lending;

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers


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