Bank of Japan Equity Purchases: The (Non-)Effects of Extreme Quantitative Easing*

Whatever it takes: the real effects of unconventional monetary policy

Ben Charoenwong, Randall Morck and Yupana Wiwattanakantang

Review of Finance, 2021, vol. 25, issue 3, 713-743

Abstract: From January 2011 through March 2018, the Bank of Japan purchased equity index exchange-traded funds (ETFs) worth about 3.5% of GDP. Identification of the effect of central bank ETF purchases on stock valuations and corporate responses is via differently-weighted and changing stock indices. BOJ purchases lift valuations, increase share issuances, and increase total assets. On average, the latter increase is due to cash and short-term securities rather than capital investment. However, firms with worse corporate governance do increase capital investment. These findings suggest central bank equity purchases are a problematic tool for stimulating economic growth through high broad-based private-sector corporate investment.

Keywords: Unconventional monetary policy; Real investment; Corporate governance; Asia (search for similar items in EconPapers)
JEL-codes: E44 E58 G31 G32 G34 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (8)

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Working Paper: Bank of Japan Equity Purchases: The (Non-)Effects of Extreme Quantitative Easing (2019)
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