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The effect of Bank of Japan's commitment and the expectation form

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  • Kunihiro Hanabusa

Abstract

This article uses a Lag Augmented Vector Autoregressive (LA-VAR) method to examine whether Bank of Japan's (BOJ) clarification of the commitment under the Quantitative Easing Policy (QEP) affects the relationship between macroeconomic variables. We compare the results with those obtained when a standard VAR approach is used. These empirical results are as follows. First, the exchange rate does not contain information on future economic performance from 2001 to 2006. Second, the bi-directional causality between the yield spread and stock price is observed in the period before the clarification of the commitment. However, there is no evidence of the causal relationship in the period after the clarification of the commitment.

Suggested Citation

  • Kunihiro Hanabusa, 2012. "The effect of Bank of Japan's commitment and the expectation form," Applied Financial Economics, Taylor & Francis Journals, vol. 22(6), pages 445-460, March.
    • Handle: RePEc:taf:apfiec:v:22:y:2012:i:6:p:445-460
    DOI: 10.1080/09603107.2011.617693
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    References listed on IDEAS

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    1. Michael Woodford, 1999. "Commentary : how should monetary policy be conducted in an era of price stability?," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 277-316.
    2. Hiroshi Ugai, 2006. "Effects of the Quantitative Easing Policy: A Survey of Empirical Analyses," Bank of Japan Working Paper Series 06-E-10, Bank of Japan.
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    Cited by:

    1. Yutaka Kurihara & Akio Fukushima, 2015. "Monetary Approach for Determining Exchange Rates and Recent Monetary Policy of Japan," International Journal of Financial Economics, Research Academy of Social Sciences, vol. 4(1), pages 23-31.
    2. Hanabusa, Kunihiro, 2017. "Japan’s quantitative monetary easing policy: Effect on the level and volatility of yield spreads," Journal of Asian Economics, Elsevier, vol. 53(C), pages 56-66.

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