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High-frequency Identification of Unconventional Monetary Policy Shocks in Japan

Author

Listed:
  • Hiroyuki Kubota

    (The University of Tokyo)

  • Mototsugu Shintani

    (The University of Tokyo)

Abstract

In this paper, we consider the issue of identifying unconventional monetary policy shocks in Japan by using the market-based measure of policy surprises obtained from high-frequency data. First, we investigate the effects of the monetary policy surprises on asset prices changes as an event study, which is based on the date and time of the monetary policy announcement made by the Bank of Japan. Using the methodology developed by Gürkaynak, Sack, and Swanson (2005), we find that the contractionary monetary policy has negative effects on stock returns. Second, we estimate the effects of unconventional monetary policy on real economic activity and inflation. By combining the vector autoregressive approach of Gertler and Karadi (2015) who employ high-frequency policy surprises as external instruments to identify the structural shocks, and that of Debortoli, Galí, and Gambetti (2020), who employ the long rate as the policy indicator during the period when the short rate is constrained by the zero lower bound, we find that unconventional monetary policy has been effective in Japan over the last two decades.

Suggested Citation

  • Hiroyuki Kubota & Mototsugu Shintani, 2020. "High-frequency Identification of Unconventional Monetary Policy Shocks in Japan," CARF F-Series CARF-F-502, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    • Handle: RePEc:cfi:fseres:cf502
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    1. Martin Feldkircher & Kazuhiko Kakamu, 2022. "How does monetary policy affect income inequality in Japan? Evidence from grouped data," Empirical Economics, Springer, vol. 62(5), pages 2307-2327, May.
    2. 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).

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