Unconventional Monetary Policy and a Financial Intermediary: Were they Relevant to Fluctuations in the Japanese Economy?

Siyu Zhang ()
Additional contact information
Siyu Zhang: Graduate School of Economics, Meiji Gakuin University, 1-2-37 Shirokanedai, Minato-ku, Tokyo 108-8636, Japan

Journal of International Commerce, Economics and Policy (JICEP), 2020, vol. 11, issue 03, 1-17

Abstract: In this paper, we study whether the implementation of unconventional monetary policy (UMP) in Japan is relevant to its economy fluctuations. We conducted a Bayesian estimation of a DSGE model with an endogenous financial intermediary, and the central bank in the model is allowed to conduct a credit policy. Our findings can be summarized in the following three points: first, we find that the estimated posterior distribution of model parameters and the impulse response provide a plausible interpretation of the data. Second, by shock decomposition, we find that the credit supply shock of the bank sector played a crucial role in the GDP and investment fluctuations in the sample period. Third, the estimated risk spread reveals a high degree of correlation to the actual credit spread in Japan. Our estimation results suggest that UMP in Japan is effective in the sense of narrowing credit spreads, which leads to subsequent increase in investment and, in turn, positively affects the economy.

Keywords: Financial friction; unconventional monetary policy; DSGE; Bayesian estimation (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S1793993320500118
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:jicepx:v:11:y:2020:i:03:n:s1793993320500118

Ordering information: This journal article can be ordered from

DOI: 10.1142/S1793993320500118

Access Statistics for this article

Journal of International Commerce, Economics and Policy (JICEP) is currently edited by Ramkishen S. Rajan

More articles in Journal of International Commerce, Economics and Policy (JICEP) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().