Macroeconomic effects of monetary policy in Japan: an analysis using interest rate futures surprises

Hiroyuki Kubota () and Mototsugu Shintani ()
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Hiroyuki Kubota: University of California, Los Angeles
Mototsugu Shintani: The University of Tokyo

Empirical Economics, 2025, vol. 68, issue 2, No 12, 783-801

Abstract: Abstract We estimate the effects of monetary policy on the aggregate economy in Japan during the last three decades when the effective lower bound (ELB) on interest rates was occasionally binding. We use monetary policy surprises from the interest rate futures market as the external instrument to identify monetary policy shocks in the vector autoregressive model. We find that monetary policy has been effective in Japan during the last three decades, and the effect was more persistent in the ELB regime than in the non-ELB regime. In a simulation exercise, we further show that a New Keynesian model with forward guidance can replicate our empirical finding.

Keywords: Unconventional monetary policy; High-frequency identification; Structural vector autoregressive models; External instruments; Effective lower bound (search for similar items in EconPapers)
JEL-codes: E31 E32 E44 E52 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s00181-024-02654-4

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