Recent monetary policy effects on Japanese macroeconomy

Yutaka Kurihara

doi:10.18533/jefs.v5i05.296

Abstract

This paper empirically analyzes the effects of recent monetary policy based on expected and real-time data for Japan. Also, expected data between different time periods would have impacts on the economy and are taken into account. Since the 2000s, Japan has experienced a serious recession and low or zero interest rates policy has been conducted, so such a special situation might have influence on the economy. The empirical results show that past forecast error data of GDP plays a significant role on macro economy in Japan, however, impacts on the economy are not found during a longer period, over a quarter. Furthermore, forecast data is not crucial to the economy.

Highlights

This paper analyzes the effects of recent monetary policy based on expected and real-time data for Japan
As Cloyne and Hürtgen (2016) indicated, this paper is characterized by three things: monetary policy instruments, interest rates, and other macroeconomic variables are determined simultaneously; policymakers are likely to react to expected future economic conditions as well as current and past information; and policymakers base their decisions on real-time data instead of ex post data often used in other empirical studies
Result suggest that not all of the empirical analyses are robust, but they show that past forecast error data of GDP plays a significant role on the macro economy in Japan

Summary

Introduction

The basic discount rate and basic loan rate still exists, this monetary policy objective could be perceived as a change from holding a level of reserves at the BOJ to one that transfers funds into lending to combat deflation and to boost the economy. Under this quantitative easing policy, which began March 19, 2011, the BOJ started to purchase huge amounts of Japanese government bonds to arrive at its target level of current account balances held by financial institutions. It would be possible and adequate to divide into more periods than two, but this paper uses quarterly data for empirical analysis, so two periods are applied in this paper

Related Studies

Theoretical view

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