Japanese Fiscal Policy under the Zero Lower Bound of Nominal Interest Rates: Time-Varying Parameters Vector Autoregression

Hiroshi Morita

No 627, Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: This study investigates whether the effects of fiscal policy are enhanced during ZLB periods. We present a new strategy for identifying unconventional monetary policy shocks in the framework of a time-varying parameters vector autoregressive model. The main findings are as follows. First, during ZLB periods, the volatility of short-term interest rates is quite small, while that of the monetary base is large. Second, fiscal policy shocks have significant positive time-varying effects on GDP after adoption of unconventional monetary policy. Third, the effects of fiscal policy shocks increase during a ZLB period.

Keywords: TVP-VAR model; zero lower bound; sign restriction; fiscal policy (search for similar items in EconPapers)
JEL-codes: C11 C32 E52 E62 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2015-07
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:hit:hituec:627

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