Identifying the Effect of Bank of Japan's Liquidity Facilities: The Case of CP Operations During Financial Turmoil

Yasuo Hirose and Shinsuke Ohyama
Additional contact information
Shinsuke Ohyama: Bank of Japan

No 09-E-7, Bank of Japan Working Paper Series from Bank of Japan

Abstract: To what extent did the Bank of Japan's liquidity facilities for corporate financing reduce commercial paper (CP) issue-rates in Japan? To answer this question, we propose a simple structural model that illustrates the market for the CP operations and their effects on the CP primary market. Based on the structural model, we measure the effects of the CP operations as differences between the actual rates in the primary market and the counterfactual rates without the operations, and decompose the effects into three factors. We apply our model to identifying effects of CP operations from October 2008 to May 2009, including the period after the Bank of Japan introduced the outright purchase of CP and its special funds-supplying operation accepting CPs as collateral in addition to the CP repo operation. Our results suggest that the CP repo operation and the outright purchase of CP had remarkable effects intially, however, later their effects were subdued, and that effects of the special funds-supplying operation were substantial and persistent from January to April 2009.

Keywords: Commercial paper; Corporate finance; Market operations; Monetary policy (search for similar items in EconPapers)
JEL-codes: E50 E52 E58 G10 (search for similar items in EconPapers)
Date: 2009-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.boj.or.jp/en/research/wps_rev/wps_2009/data/wp09e07.pdf (application/pdf)

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:boj:bojwps:09-e-7

Access Statistics for this paper

More papers in Bank of Japan Working Paper Series from Bank of Japan Contact information at EDIRC.
Bibliographic data for series maintained by Bank of Japan ().