IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Not all international monetary shocks are alike for the Japanese economy

It is found that over 1999:1-2012:12 China’s monetary expansion influences Japan through the effect of China’s growth on world commodity prices, increased demand for imports, and exchange rate policy. China’s monetary expansion is associated with significant increases in Japan’s industrial production, exports and inflation, and decreases in the trade-weighted yen. In contrast, U.S. monetary expansion results in contraction in Japan’s industrial production, exports and trade balance (expenditure-switching). Monetary expansion in the Euro area does not significantly affect Japan. Structural vector error correction models are estimated. Results are robust to various contemporaneous restrictions for the effect of international monetary variables, the interaction of foreign and domestic variables and to factor augmented VAR to identify monetary shocks

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by University of Tasmania, Tasmanian School of Business and Economics in its series Working Papers with number 16920.

in new window

Length: 35 pages
Date of creation: 05 Aug 2013
Date of revision: 05 Aug 2013
Publication status: Published by the University of Tasmania. Discussion paper 2013-06
Handle: RePEc:tas:wpaper:16920
Contact details of provider: Postal:
Private Bag 85, Hobart, Tasmania 7001

Phone: +61 3 6226 7672
Fax: +61 3 6226 7587
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Dedola, Luca & Lippi, Francesco, 2005. "The monetary transmission mechanism: Evidence from the industries of five OECD countries," European Economic Review, Elsevier, vol. 49(6), pages 1543-1569, August.
  2. Sims, Christopher A. & Zha, Tao, 2006. "Does Monetary Policy Generate Recessions?," Macroeconomic Dynamics, Cambridge University Press, vol. 10(02), pages 231-272, April.
  3. Kim, Soyoung & Yang, Doo Yong, 2012. "International monetary transmission in East Asia: Floaters, non-floaters, and capital controls," Japan and the World Economy, Elsevier, vol. 24(4), pages 305-316.
  4. Ben S. Bernanke & Jean Boivin & Piotr Eliasz, 2005. "Measuring the Effects of Monetary Policy: A Factor-Augmented Vector Autoregressive (FAVAR) Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 120(1), pages 387-422.
  5. Garratt, Anthony & Koop, Gary & Mise, Emi & Vahey, Shaun P., 2009. "Real-Time Prediction With U.K. Monetary Aggregates in the Presence of Model Uncertainty," Journal of Business & Economic Statistics, American Statistical Association, vol. 27(4), pages 480-491.
  6. Dées, Stéphane & di Mauro, Filippo & Pesaran, Hashem & Smith, Vanessa, 2005. "Exploring the international linkages of the euro area: a global VAR analysis," Working Paper Series 0568, European Central Bank.
  7. M. Hashem Pesaran & Til Schuermann & Scott M. Weiner, 2001. "Modelling regional interdependencies using a global error-correcting macroeconometric model," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 B4-1, International Conferences on Panel Data.
  8. MacKinnon, James G & Haug, Alfred A & Michelis, Leo, 1999. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(5), pages 563-77, Sept.-Oct.
  9. Eickmeier, Sandra & Lemke, Wolfgang & Marcellino, Massimiliano, 2011. "The changing international transmission of financial shocks: evidence from a classical time-varying FAVAR," Discussion Paper Series 1: Economic Studies 2011,05, Deutsche Bundesbank, Research Centre.
  10. Nagayasu, Jun, 2007. "Empirical analysis of the exchange rate channel in Japan," Journal of International Money and Finance, Elsevier, vol. 26(6), pages 887-904, October.
  11. Maurice Obstfeld and Kenneth Rogoff., 1995. "Exchange Rate Dynamics Redux," Center for International and Development Economics Research (CIDER) Working Papers C95-048, University of California at Berkeley.
  12. Uhlig, H.F.H.V.S., 1999. "What are the Effects of Monetary Policy on Output? Results from an Agnostic Identification Procedure," Discussion Paper 1999-28, Tilburg University, Center for Economic Research.
  13. Gordon, David B & Leeper, Eric M, 1994. "The Dynamic Impacts of Monetary Policy: An Exercise in Tentative Identification," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1228-47, December.
  14. Ying Fang & Shicheng Huang & Linlin Niu, 2013. "De Facto Currency Baskets of China and East Asian Economies: The Rising Weights," WISE Working Papers 2013-10-14, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
  15. Yoshiyasu Ono & Kazuo Ogawa & Atsushi Yoshida, 2004. "The Liquidity Trap And Persistent Unemployment With Dynamic Optimizing Agents: Empirical Evidence," The Japanese Economic Review, Japanese Economic Association, vol. 55(4), pages 355-371.
  16. John B. Taylor & John C. Williams, 2008. "A black swan in the money market," Working Paper Series 2008-04, Federal Reserve Bank of San Francisco.
  17. Kazi, Irfan Akbar & Wagan, Hakimzadi & Akbar, Farhan, 2013. "The changing international transmission of U.S. monetary policy shocks: Is there evidence of contagion effect on OECD countries," Economic Modelling, Elsevier, vol. 30(C), pages 90-116.
  18. Canova, Fabio, 2003. "The Transmission of US Shocks to Latin America," CEPR Discussion Papers 3963, C.E.P.R. Discussion Papers.
  19. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
  20. Granville, Brigitte & Mallick, Sushanta & Zeng, Ning, 2011. "Chinese exchange rate and price effects on G3 import prices," Journal of Asian Economics, Elsevier, vol. 22(6), pages 427-440.
  21. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
  22. Marvin Goodfriend & Eswar Prasad, 2007. "A Framework for Independent Monetary Policy in China," CESifo Economic Studies, CESifo, vol. 53(1), pages 2-41, March.
  23. Ratti, Ronald A & Vespignani, Joaquin L., 2012. "Crude Oil Prices: China’s Influence Over 1996-2011," Working Papers 15728, University of Tasmania, Tasmanian School of Business and Economics, revised 17 Dec 2012.
  24. Kim, Soyoung & Roubini, Nouriel, 2000. "Exchange rate anomalies in the industrial countries: A solution with a structural VAR approach," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 561-586, June.
  25. Alessio Anzuini & Marco J. Lombardi & Patrizio Pagano, 2012. "The impact of monetary policy shocks on commodity prices," Temi di discussione (Economic working papers) 851, Bank of Italy, Economic Research and International Relations Area.
  26. Ma, Guonan & McCauley, Robert N., 2011. "The evolving renminbi regime and implications for Asian currency stability," Journal of the Japanese and International Economies, Elsevier, vol. 25(1), pages 23-38, March.
  27. Li Wang & John Whalley, 2007. "The Impacts of Renminbi Appreciation on Trades Flows and Reserve Accumulation in a Monetary Trade Model," NBER Working Papers 13586, National Bureau of Economic Research, Inc.
  28. Nakashima, Kiyotaka & Saito, Makoto, 2012. "On the comparison of alternative specifications for money demand: The case of extremely low interest rate regimes in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 26(3), pages 454-471.
  29. Vincenzo Quadrini & Fabrizio Perri, 2011. "International Recessions," 2011 Meeting Papers 123, Society for Economic Dynamics.
  30. Carstensen, Kai, 2006. "Stock Market Downswing and the Stability of European Monetary Union Money Demand," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 395-402, October.
  31. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 1997. "Monetary policy shocks: what have we learned and to what end?," Working Paper Series, Macroeconomic Issues WP-97-18, Federal Reserve Bank of Chicago.
  32. Johansson, Anders C., 2010. "China’s Growing Influence in Southeast Asia - Monetary Policy and Equity Markets," Working Paper Series 2010-16, China Economic Research Center, Stockholm School of Economics.
  33. Haroon Mumtaz & Paolo Surico, 2012. "Evolving International Inflation Dynamics: World And Country-Specific Factors," Journal of the European Economic Association, European Economic Association, vol. 10(4), pages 716-734, 08.
  34. John B. Taylor, 2012. "The Great Deviation," Book Chapters, in: Evan F. Koenig & Robert Leeson & George A. Kahn (ed.), The Taylor Rule and the Transformation of Monetary Policy, chapter 7 Hoover Institution, Stanford University.
  35. Ippei Fujiwara, 2003. "Is There a Direct Effect of Money?: Money's Role in an Estimated Monetary Business Cycle Model of the Japanese Economy," Discussion Papers in Economics and Business 03-15, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  36. Yiping Huang & Peichu Xie & Jiao Wang, 2014. "International Transmission of the People's Bank of China's Balance Sheet Expansion," Asian Economic Policy Review, Japan Center for Economic Research, vol. 9(2), pages 276-296, 07.
  37. Kim, Soyoung, 2001. "International transmission of U.S. monetary policy shocks: Evidence from VAR's," Journal of Monetary Economics, Elsevier, vol. 48(2), pages 339-372, October.
  38. Lance J. Bachmeier & Norman R. Swanson, 2005. "Predicting Inflation: Does The Quantity Theory Help?," Economic Inquiry, Western Economic Association International, vol. 43(3), pages 570-585, July.
  39. Julian Di Giovanni & Jay C Shambaugh, 2006. "The Impact of Foreign Interest Rateson the Economy; The Role of the Exchange Rate Regime," IMF Working Papers 06/37, International Monetary Fund.
  40. Zongwu Cai & Linna Chen & Ying Fang, 2013. "A New Forecasting Model for USD/CNY Exchange Rate," WISE Working Papers 2013-10-14, Wang Yanan Institute for Studies in Economics (WISE), Xiamen University.
  41. Lutz Kilian & Bruce Hicks, 2013. "Did Unexpectedly Strong Economic Growth Cause the Oil Price Shock of 2003–2008?," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 32(5), pages 385-394, 08.
  42. Ryu‐ichiro Murota & Yoshiyasu Ono, 2012. "Zero Nominal Interest Rates, Unemployment, Excess Reserves And Deflation In A Liquidity Trap," Metroeconomica, Wiley Blackwell, vol. 63(2), pages 335-357, 05.
  43. Tomasz Koluk & Aaron Mehrotra, 2009. "The impact of Chinese monetary policy shocks on East and South-East Asia," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(1), pages 121-145, 01.
  44. James D. Hamilton, 2011. "Historical Oil Shocks," NBER Working Papers 16790, National Bureau of Economic Research, Inc.
  45. Koray, Faik & McMillin, W. Douglas, 1999. "Monetary shocks, the exchange rate, and the trade balance," Journal of International Money and Finance, Elsevier, vol. 18(6), pages 925-940, December.
  46. Yoshiyasu Ono, 2006. "International Asymmetry In Business Activity And Appreciation Of A Stagnant Country'S Currency," The Japanese Economic Review, Japanese Economic Association, vol. 57(1), pages 101-120.
  47. Ratti, Ronald A. & Vespignani, Joaquin L., 2013. "Liquidity and crude oil prices: China's influence over 1996–2011," Economic Modelling, Elsevier, vol. 33(C), pages 517-525.
  48. Cheng, Wenli & Zhang, Dingsheng, 2012. "A monetary model of China–US trade relations," Economic Modelling, Elsevier, vol. 29(2), pages 233-238.
  49. Swanson, Norman R., 1998. "Money and output viewed through a rolling window," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 455-474, May.
  50. Huayu Sun, 2009. "Autonomy and Effectiveness of Chinese Monetary Policy under the De Facto Fixed Exchange Rate System," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(3), pages 23-38.
  51. Kim, Soyoung, 1999. "Do monetary policy shocks matter in the G-7 countries? Using common identifying assumptions about monetary policy across countries," Journal of International Economics, Elsevier, vol. 48(2), pages 387-412, August.
  52. Stock J.H. & Watson M.W., 2002. "Forecasting Using Principal Components From a Large Number of Predictors," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 1167-1179, December.
  53. Luca Dedola & Francesco Lippi, 2000. "The Monetary Transmission Mechanism: Evidence from the Industry Data of Five OECD Countries," Econometric Society World Congress 2000 Contributed Papers 1833, Econometric Society.
  54. Kim, Soyoung, 2001. "Effects of monetary policy shocks on the trade balance in small open European countries," Economics Letters, Elsevier, vol. 71(2), pages 197-203, May.
  55. Kunst, Robert M, 1993. "Seasonal Cointegration in Macroeconomic Systems: Case Studies for Small and Large European Countries," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 325-30, May.
  56. Cover, James P. & Mallick, Sushanta K., 2012. "Identifying sources of macroeconomic and exchange rate fluctuations in the UK," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1627-1648.
  57. Wang, Xia & Zheng, Tingguo & Zhu, Yanli, 2014. "Money–output Granger causal dynamics in China," Economic Modelling, Elsevier, vol. 43(C), pages 192-200.
  58. Lars E.O. Svensson & Sweder van Wijnbergen, 1987. "Excess Capacity, Monopolistic Competition, and International Transmission of Monetary Disturbances," NBER Working Papers 2262, National Bureau of Economic Research, Inc.
  59. Hosono, Kaoru, 2006. "The transmission mechanism of monetary policy in Japan: Evidence from banks' balance sheets," Journal of the Japanese and International Economies, Elsevier, vol. 20(3), pages 380-405, September.
  60. Vittorio Grilli & Nouriel Roubini, 1995. "Liquidity and Exchange Rates: Puzzling Evidence from the G-7 Countries," Working Papers 95-17, New York University, Leonard N. Stern School of Business, Department of Economics.
  61. Haroon Mumtaz & Paolo Surico, 2009. "The Transmission of International Shocks: A Factor-Augmented VAR Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(s1), pages 71-100, 02.
  62. Fan, Longzhen & Yu, Yihong & Zhang, Chu, 2011. "An empirical evaluation of China's monetary policies," Journal of Macroeconomics, Elsevier, vol. 33(2), pages 358-371, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:tas:wpaper:16920. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Vitali Alexeev)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.