The Effect of Unconventional Monetary Policy on the Macro Economy: Evidence from Japan's Quantitative Easing Policy Period

Masahiko Shibamoto and Minoru Tachibana

No DP2013-12, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: This paper assesses the effectiveness of unonventional monetary policy on the macro ecnomy. It focuses on the Japanese economy during the Bank of Japan's quantitative easing policy period, and analyzes the effects of monetary policy shocks and systematic monetary policy using the vector autoregression model with simultaneous interaction between stock prices and policy decisions. The main finding is that unconventional monetary policy has a significant effect on the macro economy, which is closely in line with the existing evidence under the conventional monetary policy setting. The output effects work through the transmission linking the stock market and the real economy, while it plays a limited role in terms of the price effects. The analysis also suggests that the Bank of Japan's systematic policy responses mitigate severe downward pressure on the real economy generated from the stock market.

Keywords: Unconventional monetary policy; Vector autoregression model; Interaction between monetary policy and stock market; Effects of monetary policy shocks; Systematic monetary policy responses (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2013-04
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Citations: View citations in EconPapers (8)

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