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Unconventional Monetary Policy through Open Market Operations: A Principal Component Analysis

Markus Heckel () and Kiyohiko G. Nishimura ()
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Markus Heckel: German Institute for Japanese Studies 7-1 Kioicho, Chiyoda-ku, Tokyo 102-0094, Japan
Kiyohiko G. Nishimura: National Graduate Institute for Policy Studies 7-22-1 Roppongi, Minato-ku, Tokyo 106-8677, Japan

Asian Economic Papers, 2022, vol. 21, issue 1, 1-28

Abstract: This paper examines the unconventional monetary policies of the Bank of Japan from 2002 to 2019 with a focus on open market operations. We apply a principal component analysis to investigate the complexity of monetary policy. Our results identify four principal components that explain the variance of measures taken by the Bank of Japan and its operations of various facilities: asset purchase measures including Japanese Government Bonds (JGBs), Exchange-Traded Funds (ETFs), Japanese Real Estate Investment Trusts (J-REITs), and three different liquidity supply measures. Complexity differs substantially among different governorships of Fukui, Shirakawa (most complex), and Kuroda. We derive some conclusions from the increased complexity with implications for the economy.

Date: 2022
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