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

Heike Schenkelberg () and Sebastian Watzka

Journal of International Money and Finance, 2013, vol. 33, issue C, 327-357

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.

Keywords: Monetary policy; Zero lower bound; Quantitative easing; Structural vector autoregression (search for similar items in EconPapers)
JEL-codes: E43 E51 E52 E58 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (85)

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Working Paper: 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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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:33:y:2013:i:c:p:327-357

DOI: 10.1016/j.jimonfin.2012.11.020

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