A Regime-Switching SVAR Analysis of Quantitative Easing
Fumio Hayashi and
No CARF-F-322, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo
Central banks of major market economies have recently adopted QE (quantitative easing), allowing excess reserves to build up while maintaining the policy rate at very low levels. We develop a regime-switching SVAR (structural vector autoregression) in which the monetary policy regime, chosen by the central bank responding to economic conditions, is endogenous and observable. The model can incorporate the exit condition for terminating QE. We then apply the model to Japan, a country that has accumulated, by our count, 130 months of QE as of December 2012. Our impulse response analysis yields two findings about QE. First, an increase in reserves raises inflation and output. Second, terminating QE is not necessarily deflationary.
New Economics Papers: this item is included in nep-cba and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (7) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:cfi:fseres:cf322
Access Statistics for this paper
More papers in CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo Contact information at EDIRC.
Series data maintained by ().