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Identifying Unconventional Monetary Policy Shocks

Kiyotaka Nakashima, Masahiko Shibamoto and Koji Takahashi
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Kiyotaka Nakashima: Faculty of Economics, Konan University, Japan
Koji Takahashi: Department of Economics, University of California, San Diego, USA

No DP2017-05, Discussion Paper Series from Research Institute for Economics & Business Administration, Kobe University

Abstract: This paper proposes a novel method for identifying unconventional monetary policy shocks. The method incorporates the movement of two unconventional monetary policy indicators, namely, the size and composition of the central bank’s balance sheet, after the bank makes policy decisions. Under some restrictions imposed in the vector autoregressive model, we identify two unconventional policy shocks, quantitative and qualitative shocks, as news shocks that best portend the current and future paths of the unconventional policy indicators in response to the policy shocks. The qualitative easing shocks have expansionary effects on the real economy, while the quantitative easing shocks have contractionary effects.

Keywords: Quantitative easing; Qualitative easing; Conventional monetary policy; Vector autoregressive model; News shock (search for similar items in EconPapers)
JEL-codes: E52 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2017-03, Revised 2017-04
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https://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2017-05.pdf Revised version, 2017 (application/pdf)

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