The effect of Bank of Japan's commitment and the expectation form

Kunihiro Hanabusa

Applied Financial Economics, 2012, vol. 22, issue 6, 445-460

Abstract: This article uses a Lag Augmented Vector Autoregressive (LA-VAR) method to examine whether Bank of Japan's (BOJ) clarification of the commitment under the Quantitative Easing Policy (QEP) affects the relationship between macroeconomic variables. We compare the results with those obtained when a standard VAR approach is used. These empirical results are as follows. First, the exchange rate does not contain information on future economic performance from 2001 to 2006. Second, the bi-directional causality between the yield spread and stock price is observed in the period before the clarification of the commitment. However, there is no evidence of the causal relationship in the period after the clarification of the commitment.

Date: 2012
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DOI: 10.1080/09603107.2011.617693

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