Bank of Japan Equity Purchases: The (Non-)Effects of Extreme Quantitative Easing

Ben Charoenwong, Randall Morck and Yupana Wiwattanakantang ()

No 25525, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: From January 2011 through March 2018, the Bank of Japan purchased equity index ETFs worth about 3.5% of GDP. Identification of the effect of central bank ETF purchases on stock valuations and corporate responses is via differently-weighted and changing stock indices. BOJ purchases lift valuations, increase share issuances, and increase total assets. On average, the latter increase is due to cash and short-term securities rather than capital investment. However, firms with worse corporate governance do increase capital investment. These findings suggest central bank equity purchases are a problematic tool for stimulating economic growth through high broad-based private-sector corporate investment.

JEL-codes: E52 E58 G31 G32 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-fdg, nep-mac and nep-mon
Note: CF
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Published as Ben Charoenwong & Randall Morck & Yupana Wiwattanakantang, 2021. "Bank of Japan Equity Purchases: The (Non-)Effects of Extreme Quantitative Easing*," Review of Finance, vol 25(3), pages 713-743.

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Journal Article: Bank of Japan Equity Purchases: The (Non-)Effects of Extreme Quantitative Easing* (2021)
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