Real effects of quantitative easing at the zero lower bound: Structural VAR-based evidence from Japan

Heike Schenkelberg () and Sebastian Watzka

Munich Reprints in Economics from University of Munich, Department of Economics

Abstract: Using post-1995 Japanese data we propose a new sign restriction SVAR approach to identify monetary policy shocks when the economy is at the Zero Lower Bound (ZLB). The identifying restrictions are based on predictions of Eggertsson’s (2010) New Keynesian DSGE models when the economy is stuck at the ZLB. A quantitative easing shock leads to a significant decrease in long-term interest rates and significantly increases output and the price level. However, the effects are only transitory. This suggests that while the Japanese quantitative easing experiment was successful in temporarily stimulating real activity, it did not lead to a persistent increase in inflation. These results are interesting not only for Japan, but also for other advanced economies where monetary policy is currently constrained by the ZLB.

Date: 2013
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Citations: View citations in EconPapers (95)

Published in Journal of International Money and Finance 33(2013): pp. 327-357

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Related works:
Journal Article: Real effects of quantitative easing at the zero lower bound: Structural VAR-based evidence from Japan (2013)
Working Paper: Real Effects of Quantitative Easing at the Zero-Lower Bound: Structural VAR-based Evidence from Japan (2011)
Working Paper: Real effects of Quantitative Easing at the Zero-Lower Bound: Structural VAR-based evidence from Japan (2011)
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