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The macroeconomic effects of monetary policy: Evidence from Japan

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  • Nagao, Ryoya
  • Kondo, Yoshihiro
  • Nakazono, Yoshiyuki

Abstract

This study examines the macroeconomic effects of monetary policy in Japan. We apply the new identification strategy proposed by Bu et al. (2021) to the Japanese case and estimate monetary policy shocks that bridge periods of conventional and unconventional monetary policymaking. We show the macroeconomic effects of monetary policy; a contractionary monetary policy shock significantly decreases output and inflation rates even under the effective lower bound. However, because the shorter-term and longer-term nominal interest rates are already close to zero, the magnitude of monetary policy shocks on the macroeconomic variables is modest.

Suggested Citation

  • Nagao, Ryoya & Kondo, Yoshihiro & Nakazono, Yoshiyuki, 2021. "The macroeconomic effects of monetary policy: Evidence from Japan," Journal of the Japanese and International Economies, Elsevier, vol. 61(C).
    • Handle: RePEc:eee:jjieco:v:61:y:2021:i:c:s0889158321000289
    DOI: 10.1016/j.jjie.2021.101149
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    Cited by:

    1. Matsumoto, Ryo & Morita, Hiroshi & Ono, Taiki, 2022. "Central Bank Information Effects in Japan : The Role of Uncertainty Channel," Discussion paper series HIAS-E-126, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    2. Ritsu Yano & Yoshiyuki Nakazono & Kento Tango, 2024. "The Transmission of Monetary Policy Shocks: Evidence from Japan," TUPD Discussion Papers 57, Graduate School of Economics and Management, Tohoku University.
    3. Chevaughn van der Westhuizen & Renee van Eyden & Goodness C. Aye, 2023. "Monetary Policy Effectiveness in the Face of Uncertainty: The Real Macroeconomic Impact of a Monetary Policy Shock in South Africa during High and Low Uncertainty States," Working Papers 202331, University of Pretoria, Department of Economics.
    4. Hiroyuki Kubota & Mototsugu Shintani, 2023. "Macroeconomic Effects of Monetary Policy in Japan: An Analysis Using Interest Rate Futures Surprises," CARF F-Series CARF-F-555, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.

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    More about this item

    Keywords

    Monetary policy shock; Structural VAR; Unconventional monetary policy; Variance decomposition;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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