IDEAS home Printed from https://ideas.repec.org/a/bla/intfin/v13y2010i3p461-483.html
   My bibliography  Save this article

Identifying the Effect of the Bank of Japan's Liquidity Facilities: The Case of Commercial Paper Operations During the Financial Turmoil

Author

Listed:
  • Yasuo Hirose
  • Shinsuke Ohyama

Abstract

How do we evaluate the effects of unconventional monetary policy measures? To answer this question, we propose a simple structural model that enables us to identify the effects of liquidity facilities during financial turmoil. Specifically, we develop a model that examines the effects of the Bank of Japan's (BoJ's) commercial paper (CP) operations on the CP primary market. On the basis of the structural model, we measure the effects of CP operations as differences between the actual rates in the primary market and the counterfactual rates without the operations, and decompose the effects into three factors. We apply our model to identifying the effects of CP operations from October 2008 to May 2009, including the period after the BoJ introduced the outright purchase of CP and its special funds‐supplying operation accepting CPs as collateral in addition to the CP repo operation. Our results suggest that the CP repo operation and the outright purchase of CP had marked effects initially; however, these effects were subdued subsequently. Moreover, the effects of the special funds‐supplying operation were substantial and persistent from January to April 2009.

Suggested Citation

  • Yasuo Hirose & Shinsuke Ohyama, 2010. "Identifying the Effect of the Bank of Japan's Liquidity Facilities: The Case of Commercial Paper Operations During the Financial Turmoil," International Finance, Wiley Blackwell, vol. 13(3), pages 461-483, December.
    • Handle: RePEc:bla:intfin:v:13:y:2010:i:3:p:461-483
    DOI: 10.1111/j.1468-2362.2010.01273.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1468-2362.2010.01273.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1468-2362.2010.01273.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. John B. Taylor & John C. Williams, 2009. "A black swan in the money market," Proceedings, Federal Reserve Bank of San Francisco, issue Jan.
    2. Jens H. E. Christensen & Jose A. Lopez & Glenn D. Rudebusch, 2014. "Do Central Bank Liquidity Facilities Affect Interbank Lending Rates?," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 32(1), pages 136-151, January.
    3. Hamilton, James D, 1997. "Measuring the Liquidity Effect," American Economic Review, American Economic Association, vol. 87(1), pages 80-97, March.
    4. McAndrews, James & Sarkar, Asani & Wang, Zhenyu, 2017. "The effect of the term auction facility on the London interbank offered rate," Journal of Banking & Finance, Elsevier, vol. 83(C), pages 135-152.
    5. Judson, Ruth A. & Klee, Elizabeth, 2010. "Whither the liquidity effect: The impact of Federal Reserve open market operations in recent years," Journal of Macroeconomics, Elsevier, vol. 32(3), pages 713-731, September.
    6. Hirose, Yasuo & Ohyama, Shinsuke & Taniguchi, Ken, 2012. "The effects of Bank of Japan’s liquidity provision on the year-end premium," Journal of the Japanese and International Economies, Elsevier, vol. 26(1), pages 179-185.
    7. Carpenter, Seth & Demiralp, Selva, 2006. "The Liquidity Effect in the Federal Funds Market: Evidence from Daily Open Market Operations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(4), pages 901-920, June.
    8. Eisenschmidt, Jens & Hirsch, Astrid & Linzert, Tobias, 2009. "Bidding behaviour in the ECB's main refinancing operations during the financial crisis," Working Paper Series 1052, European Central Bank.
    9. Yasuo Hirose & Shinsuke Ohyama & Ken Taniguchi, 2009. "Identifying the Effect of Bank of Japan's Liquidity Provision on the Year-End Premium: A Structural Approach," Bank of Japan Working Paper Series 09-E-6, Bank of Japan.
    10. Hayashi, Fumio, 2001. "Identifying a Liquidity Effect in the Japanese Interbank Market," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(2), pages 287-315, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Yang Zhang & Lena Suchanek & Jonathan Swarbrick & Joel Wagner & Tudor Schlanger, 2021. "Sequencing Extended Monetary Policies at the Effective Lower Bound," Discussion Papers 2021-10, Bank of Canada.
    2. Kotaro Ishi & Mr. Kenji Fujita & Mr. Mark R. Stone, 2011. "Should Unconventional Balance Sheet Policies Be Added to the Central Bank toolkit? a Review of the Experience so Far," IMF Working Papers 2011/145, International Monetary Fund.
    3. Buchholtz, Alec, 2020. "Japan's Outright Purchases of Commercial Paper (Japan GFC)," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 2(3), pages 405-420, April.
    4. Hirose, Yasuo & Ohyama, Shinsuke & Taniguchi, Ken, 2012. "The effects of Bank of Japan’s liquidity provision on the year-end premium," Journal of the Japanese and International Economies, Elsevier, vol. 26(1), pages 179-185.
    5. Buchholtz, Alec, 2020. "Japan's Special Funds-Supplying Operations (Japan GFC)," Journal of Financial Crises, Yale Program on Financial Stability (YPFS), vol. 2(3), pages 421-436, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Friedman, Benjamin M. & Kuttner, Kenneth N., 2010. "Implementation of Monetary Policy: How Do Central Banks Set Interest Rates?," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 24, pages 1345-1438, Elsevier.
    2. Marquez, Jaime & Morse, Ari & Schlusche, Bernd, 2013. "The Federal Reserve’s balance sheet and overnight interest rates: Empirical modeling of exit strategies," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5300-5315.
    3. James D. Hamilton & Jing Cynthia Wu, 2012. "The Effectiveness of Alternative Monetary Policy Tools in a Zero Lower Bound Environment," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 3-46, February.
    4. Warren B. Hrunga & Jason S. Seligman, 2015. "Responses to the Financial Crisis, Treasury Debt, and the Impact on Short-Term Money Markets," International Journal of Central Banking, International Journal of Central Banking, vol. 11(1), pages 151-190, January.
    5. Scott Brave & Hesna Genay, 2011. "Federal Reserve policies and financial market conditions during the crisis," Working Paper Series WP-2011-04, Federal Reserve Bank of Chicago.
    6. Alexander Kroeger & John McGowan & Asani Sarkar, 2018. "The pre-crisis monetary policy implementation framework," Economic Policy Review, Federal Reserve Bank of New York, issue 24-2, pages 38-70.
    7. Campbell, Sean & Covitz, Daniel & Nelson, William & Pence, Karen, 2011. "Securitization markets and central banking: An evaluation of the term asset-backed securities loan facility," Journal of Monetary Economics, Elsevier, vol. 58(5), pages 518-531.
    8. Florian Heider & Marie Hoerova, 2009. "Interbank Lending, Credit-Risk Premia, and Collateral," International Journal of Central Banking, International Journal of Central Banking, vol. 5(4), pages 5-43, December.
    9. Cassola, Nuno & Morana, Claudio, 2012. "Euro money market spreads during the 2007–? financial crisis," Journal of Empirical Finance, Elsevier, vol. 19(4), pages 548-557.
    10. Fukunaga, Ichiro & Kato, Naoya, 2016. "Japanese repo and call markets before, during, and emerging from the financial crisis," Journal of the Japanese and International Economies, Elsevier, vol. 39(C), pages 17-34.
    11. John Kandrac & Bernd Schlusche, 2017. "Quantitative Easing and Bank Risk Taking: Evidence from Lending," Finance and Economics Discussion Series 2017-125, Board of Governors of the Federal Reserve System (U.S.).
    12. Mr. Mark R. Stone & W. Christopher Walker & Yosuke Yasui, 2009. "From Lombard Street to Avenida Paulista: Foreign Exchange Liquidity Easing in Brazil in Response to the Global Shock of 2008–09," IMF Working Papers 2009/259, International Monetary Fund.
    13. Glenn D. Rudebusch, 2010. "Macro‐Finance Models Of Interest Rates And The Economy," Manchester School, University of Manchester, vol. 78(s1), pages 25-52, September.
    14. Stefano Puddu & Andreas Waelchli, 2011. "Too TAF Towards the Risk," IRENE Working Papers 11-01, IRENE Institute of Economic Research.
    15. Abbassi, Puriya & Linzert, Tobias, 2012. "The effectiveness of monetary policy in steering money market rates during the financial crisis," Journal of Macroeconomics, Elsevier, vol. 34(4), pages 945-954.
    16. Judson, Ruth A. & Klee, Elizabeth, 2011. "Big bank, small bank: Monetary policy implementation and banks' reserve management strategies," Journal of Economics and Business, Elsevier, vol. 63(4), pages 306-328, July.
    17. Yoldas, Emre & Senyuz, Zeynep, 2018. "Financial stress and equilibrium dynamics in term interbank funding markets," Journal of Financial Stability, Elsevier, vol. 34(C), pages 136-149.
    18. Frederic S. Mishkin, 2011. "Monetary Policy Strategy: Lessons from the Crisis," NBER Working Papers 16755, National Bureau of Economic Research, Inc.
    19. Nuno Cassola & Claudio Morana, 2010. "The 2007-? financial crisis: a euro area money market perspective," ICER Working Papers - Applied Mathematics Series 35-2010, ICER - International Centre for Economic Research.
    20. Kopchak, Seth J., 2011. "The liquidity effect for open market operations," Journal of Banking & Finance, Elsevier, vol. 35(12), pages 3292-3299.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:intfin:v:13:y:2010:i:3:p:461-483. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=1367-0271 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.