Macroeconomic Effects of Unconventional Monetary Policy in Japan: Analysis Using Narrative Sign Restrictions

Shumpei Fujita, Hirokuni Iiboshi and Mototsugu Shintani

No HIAS-E-156, Discussion paper series from Hitotsubashi Institute for Advanced Study, Hitotsubashi University

Abstract: We evaluate the macroeconomic effects of unconventional monetary policy (UMP) in Japan, focusing in particular on the Quantitative and Qualitative Monetary Easing (QQE) implemented during Governor Haruhiko Kuroda’s tenure. To identify UMP shocks, we impose narrative sign restrictions on structural shocks and on historical decompositions, exploiting three major policy episodes that generated significant surprises in financial markets. Our results indicate that expansionary UMP shocks increase both output and the inflation rate. The exchange rates, stock prices, and bank lending also respond to the UMP shock in a manner consistent with standard macroeconomic theory. Furthermore, narrative sign restrictions resolve some puzzling responses observed with Cholesky decomposition and tighten the wide credible intervals typical of standard sign restrictions.

Keywords: Monetary policy shock; narrative restrictions; structural vector autoregressive models (search for similar items in EconPapers)
JEL-codes: E31 E32 E44 E52 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2026-01
New Economics Papers: this item is included in nep-mac and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hiasdp:hias-e-156

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