 Unconventional monetary policy and the bond market in Japan: A new Keynesian perspectiveParantap Basu and Kenji Wada Japan and the World Economy, 2023, vol. 67, issue C Abstract: Using the lens of a medium scale DSGE model, we analyze macroeconomic effects of Japan’s unconventional monetary policy which is known as Qualitative and Quantitative Easing (QQE). Our focus is on the bond market. The model features: (i) commercial bank’s demand for excess reserve in response to liquidity risk and (ii) linkage among central bank, commercial banks and the government via government bonds and bank reserve. We simulate the policy effects of a quantitative easing (QE) shock and a negative shock to the interest rate on excess reserve (IOER). The QE multiplier for real GDP is 1.94 and it has substantial effect on lowering the bond yield in line with the policy target of QQE. On the other hand, an IOER cut has qualitatively similar effects on the real and financial sectors but quantitatively its effect is of second order importance. In light of these policy simulations, we evaluate Japan’s recent yield curve control policy. Keywords: QE; QQE; Excess reserve; Call rate; IOER; Yield curve control (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:67:y:2023:i:c:s0922142523000336 DOI: 10.1016/j.japwor.2023.101207 Access Statistics for this article Japan and the World Economy is currently edited by Robert Dekle and Yasushi Hamao More articles in Japan and the World Economy from Elsevier |
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