Policy Commitment and Market Expectations: Lessons Learned from Survey Based Evidence under Japan's Quantitative Easing Policy

Yoshiyuki Nakazono and Kozo Ueda

No 11-E-12, IMES Discussion Paper Series from Institute for Monetary and Economic Studies, Bank of Japan

Abstract: The Bank of Japan conducted its quantitative easing policy ( QEP) from 2001 to 2006, with the policy commitment to maintaining its QEP until the CPI inflation rate became stably zero or higher. We evaluate its effects by using individual survey data on inflation expectations as well as interest rate expectations. Our analysis reveals a kinked relationship between interest rate expectations and inflation rate expectations at around the zero percent threshold level of inflation expectations, in tune with this policy commitment. In addition, we evaluate the effects of the policy commitment on market expectations for the future path of short-term interest rates after the termination of the QEP. We find that, even when inflation expectations exceeded the threshold, interest rate expectations responded only gradually to inflation rate expectations.

Keywords: Commitment policy; policy duration effect; unconventional monetary policy; zero lower bound (search for similar items in EconPapers)
JEL-codes: C23 C24 E43 E44 E52 E58 (search for similar items in EconPapers)
Date: 2011-06
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 (2)

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Journal Article: Policy commitment and market expectations: Lessons learned from survey based evidence under Japan's quantitative easing policy (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ime:imedps:11-e-12

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