EconPapers    
Economics at your fingertips  
 

Is the Bank of Japan a Closet Monetarist? Monetary Targeting in Japan, 1978-1988

Takatoshi Ito ()

No 2879, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper investigates whether the Bank of Japan has practiced a monetarist rule since 1975. The Bank of Japan (BOJ) published a report in 1975, stating that it would pay close attention to money supply (M2), and in 1978 started announcing quarterly the "forecast" (targets) of monetary (M2) growth rate. Since 1975. the monetary growth rate has gradually declined, and inflation has subsided without causing a major fluctuation in output. This seems to be a successful case of the monetarist experiment. Has the EOJ practiced a monetarist rule, i.e., an announcement and maintenance of the K2 growth target? This paper reveals that it has not. The BOJ "forecasts" were quite accommodative in that an unexpected increase in actual money supply would make "forecasts" to allow a further increase in money supply. In other words, a "forecast" did not behave like a "target" under a strict monetarist rule. Testing a monetarist rule with "forecasts" is shown to be more powerful than testing with the actual process, under some weak assumptions. One of the necessary assumptions is that "forecasts" are rational expectations, and the rational expectations hypothesis is not rejected by the data. Thus, the conclusion of this paper is negative to a question posed by its title. Takatoshi

Date: 1989-03
Note: ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed

Downloads: (external link)
http://www.nber.org/papers/w2879.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:nbr:nberwo:2879

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w2879

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2021-06-09
Handle: RePEc:nbr:nberwo:2879