Central Bank Information Effects in Japan: The Role of Uncertainty Channel

Ryo Matsumoto, Hiroshi Morita and Taiki Ono

No HIAS-E-126, Discussion paper series from Hitotsubashi Institute for Advanced Study, Hitotsubashi University

Abstract: Central bank information effect have been analyzed in the recent literature on monetary policy. In this study, we apply the identification method by Jarocinski and Karadi (2020) to the Japanese data to empirically examine the macroeconomic effects of central bank information shock and pure monetary policy shock. These shocks are identified by combining of high-frequency identification and sign restriction. The empirical results support the presence of central bank information effects in Japan. Particularly, the central bank information shock accompanying monetary tightening decreases economic uncertainty and increases stock prices and output, suggesting that central bank’s optimistic outlook is conveyed through contractionary monetary actions. The results of the forecast error variance decomposition indicate that the central bank’s information effect may be spread through changes in uncertainty. Finally, the total effect of monetary policy and information shocks on the variables are much larger than that of the shocks identified by the conventional Cholesky decomposition. These findings are important for evaluating the true effects of monetary actions on the economy.

Keywords: Monetary policy; Information effect; High-frequency data; VAR model (search for similar items in EconPapers)
JEL-codes: C32 D83 E44 E52 G14 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2022-11
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mon
Note: November 28, 2022
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https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/78377/070_hiasDP-E-126.pdf

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Persistent link: https://EconPapers.repec.org/RePEc:hit:hiasdp:hias-e-126

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