IDEAS home Printed from https://ideas.repec.org/p/eab/financ/24520.html
   My bibliography  Save this paper

Effectiveness of the Easing of Monetary Policy in the Japanese Economy, Incorporating Energy Prices

Author

Listed:
  • Naoyuki Yoshino

    (Asian Development Bank Institute (ADBI))

  • Farhad Taghizadeh-Hesary

Abstract

Japan has reached the limits of conventional macroeconomic policy. In order to overcome deflation and achieve sustainable economic growth, the Bank of Japan (BOJ) recently set an inflation target of 2% and implemented an aggressive monetary policy so this target could be achieved as soon as possible. Although prices started to rise after the BOJ implemented monetary easing, this may have been for other reasons, such as higher oil prices. Oil became expensive as a result of the depreciated Japanese yen and this was one of the main causes of the rise in inflation. This paper shows that quantitative easing may not have stimulated the Japanese economy either. Aggregate demand, which includes private investment, did not increase significantly in Japan with lower interest rates. Private investment displays this unconventional behavior because of uncertainty about the future and because Japan’s population is aging. We believe that the remedy for Japan’s economic policy is not to be found in monetary policy. The government needs to implement serious structural changes and growth strategies.

Suggested Citation

  • Naoyuki Yoshino & Farhad Taghizadeh-Hesary, 2014. "Effectiveness of the Easing of Monetary Policy in the Japanese Economy, Incorporating Energy Prices," Finance Working Papers 24520, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:financ:24520
    as

    Download full text from publisher

    File URL: http://www.eaber.org/node/24520
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jordi Galí & Mark Gertler, 2007. "Macroeconomic Modeling for Monetary Policy Evaluation," Journal of Economic Perspectives, American Economic Association, vol. 21(4), pages 25-46, Fall.
    2. Farhad Taghizadeh-Hesary & Naoyuki Yoshino, 2016. "Which Side of the Economy Is Affected More by Oil Prices: Supply or Demand?," ADB Institute Series on Development Economics, in: Naoyuki Yoshino & Farhad Taghizadeh-Hesary (ed.), Monetary Policy and the Oil Market, edition 1, chapter 0, pages 29-53, Springer.
    3. Jordi Galí & Frank Smets & Rafael Wouters, 2012. "Unemployment in an Estimated New Keynesian Model," NBER Macroeconomics Annual, University of Chicago Press, vol. 26(1), pages 329-360.
    4. Farhad Taghizadeh Hesary & Naoyuki Yoshino & Ghahraman Abdoli & Asadollah Farzinvash, 2013. "An Estimation of the Impact of Oil Shocks on Crude Oil Exporting Economies and Their Trade Partners," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 8(4), pages 571-591, December.
    5. Naoyuki Yoshino & Eisuke Sakakibara, 2002. "The Current State of the Japanese Economy and Remedies," Asian Economic Papers, MIT Press, vol. 1(2), pages 110-126.
    6. Farhad Taghizadeh Hesary & Naoyuki Yoshino, 2014. "Monetary policies and oil price determination: an empirical analysis," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 38(1), pages 1-20, March.
    7. Yoshino, Naoyuki & Taghizadeh-Hesary, Farhad, 2014. "Three Arrows of “Abenomics” and the Structural Reform of Japan: Inflation Targeting Policy of the Central Bank, Fiscal Consolidation, and Growth Strategy," ADBI Working Papers 492, Asian Development Bank Institute.
    8. Farhad Taghizadeh-Hesary & Naoyuki Yoshino & Abbas Assari-Arani, 2016. "Economic Impacts of Oil Price Fluctuations in Developed and Developing Economies," ADB Institute Series on Development Economics, in: Naoyuki Yoshino & Farhad Taghizadeh-Hesary (ed.), Monetary Policy and the Oil Market, edition 1, chapter 0, pages 75-91, Springer.
    9. Taghizadeh Hesary Farhad & Naoyuki Yoshino, 2013. "Empirical Analysis of Oil Price Determination Based on Market Quality Theory," Keio/Kyoto Joint Global COE Discussion Paper Series 2012-044, Keio/Kyoto Joint Global COE Program.
    10. Naoyuki Yoshino & Farhad Taghizadeh-Hesary, 2014. "Monetary policy and oil price fluctuations following the subprime mortgage crisis," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 7(3), pages 157-174.
    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. Farhad Taghizadeh-Hesary & Ehsan Rasoulinezhad & Yoshikazu Kobayashi, 2016. "Oil price fluctuations and oil consuming sectors: An empirical analysis of Japan," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2016(2), pages 33-51.
    2. Farhad Taghizadeh‐Hesary & Naoyuki Yoshino & Sayoko Shimizu, 2020. "The impact of monetary and tax policy on income inequality in Japan," The World Economy, Wiley Blackwell, vol. 43(10), pages 2600-2621, October.
    3. Taghizadeh-Hesary, Farhad & Yoshino, Naoyuki & Rasoulinezhad, Ehsan, 2017. "Impact of Fukushima Nuclear Disaster on Oil-Consuming Sectors of Japan," ADBI Working Papers 659, Asian Development Bank Institute.
    4. Eunil Park & Ki Joon Kim & Sang Jib Kwon & Taeil Han & Wongi S. Na & Angel P. Del Pobil, 2017. "Economic Feasibility of Renewable Electricity Generation Systems for Local Government Office: Evaluation of the Jeju Special Self-Governing Province in South Korea," Sustainability, MDPI, vol. 9(1), pages 1-13, January.
    5. Farhad Farhad Taghizadeh-Hesary, 2015. "Macroeconomic effects of oil price fluctuations on emerging and developed economies in a model incorporating monetary variables," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2015(2), pages 51-75.

    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. Farhad Farhad Taghizadeh-Hesary, 2015. "Macroeconomic effects of oil price fluctuations on emerging and developed economies in a model incorporating monetary variables," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2015(2), pages 51-75.
    2. Yoshino, Naoyuki & Taghizadeh-Hesary, Farhad, 2014. "Three Arrows of “Abenomics” and the Structural Reform of Japan: Inflation Targeting Policy of the Central Bank, Fiscal Consolidation, and Growth Strategy," ADBI Working Papers 492, Asian Development Bank Institute.
    3. Naoyuki Yoshino & Victoriia Alekhina, 2016. "Impact of oil price fluctuations on an energy-exporting economy: Evidence from Russia," Journal of Administrative and Business Studies, Professor Dr. Usman Raja, vol. 2(4), pages 156-166.
    4. Naoyuki Yoshino & Farhad Taghizadeh-Hesary & Nour Tawk, 2017. "Decline of oil prices and the negative interest rate policy in Japan," Economic and Political Studies, Taylor & Francis Journals, vol. 5(2), pages 233-250, April.
    5. Naoyuki Yoshino & Farhad Taghizadeh-Hesary & Ali Hassanzadeh & Ahmad Danu Prasetyo, 2014. "Response of Stock Markets to Monetary Policy : An Asian Stock Market Perspective," Macroeconomics Working Papers 24516, East Asian Bureau of Economic Research.
    6. Naoyuki Yoshino & Farhad Taghizadeh-Hesary, 2016. "Causes and Remedies of the Japan's Long-lasting Recession: Lessons for China," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 24(2), pages 23-47, March.
    7. Taghizadeh-Hesary, Farhad & Rasoulinezhad, Ehsan & Yoshino, Naoyuki, 2019. "Energy and Food Security: Linkages through Price Volatility," Energy Policy, Elsevier, vol. 128(C), pages 796-806.
    8. Naoyuki Yoshino & Farhad Taghizadeh-Hesary & Hiroaki Miyamoto, 2017. "The Ineffectiveness of Japan’s Negative Interest Rate Policy," ADB Institute Series on Development Economics, in: Naoyuki Yoshino & Farhad Taghizadeh-Hesary (ed.), Japan’s Lost Decade, chapter 0, pages 147-168, Springer.
    9. Farhad Taghizadeh-Hesary & Ehsan Rasoulinezhad & Yoshikazu Kobayashi, 2016. "Oil price fluctuations and oil consuming sectors: An empirical analysis of Japan," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2016(2), pages 33-51.
    10. Yoshino, Naoyuki & Alekhina, Victoriia, 2019. "Empirical Analysis of Global Oil Price Determinants at the Disaggregated Level Over the Last Two Decades," ADBI Working Papers 982, Asian Development Bank Institute.
    11. Taghizadeh-Hesary, Farhad & Yoshino, Naoyuki & Rasoulinezhad, Ehsan & Chang, Youngho, 2019. "Trade linkages and transmission of oil price fluctuations," Energy Policy, Elsevier, vol. 133(C).
    12. Grzegorz Przekota, 2022. "Do High Fuel Prices Pose an Obstacle to Economic Growth? A Study for Poland," Energies, MDPI, vol. 15(18), pages 1-15, September.
    13. Taghizadeh-Hesary, Farhad & Yoshino, Naoyuki & Inagaki, Yugo, 2018. "Empirical Analysis of Factors Influencing Price of Solar Modules," ADBI Working Papers 836, Asian Development Bank Institute.
    14. Taghizadeh-Hesary, Farhad & Yoshino, Naoyuki & Rasoulinezhad, Ehsan, 2017. "Impact of Fukushima Nuclear Disaster on Oil-Consuming Sectors of Japan," ADBI Working Papers 659, Asian Development Bank Institute.
    15. Farhad Taghizadeh‐Hesary & Naoyuki Yoshino & Sayoko Shimizu, 2020. "The impact of monetary and tax policy on income inequality in Japan," The World Economy, Wiley Blackwell, vol. 43(10), pages 2600-2621, October.
    16. Marfatia, Hardik A. & Gupta, Rangan & Cakan, Esin, 2021. "Dynamic impact of the U.S. monetary policy on oil market returns and volatility," The Quarterly Review of Economics and Finance, Elsevier, vol. 80(C), pages 159-169.
    17. Taghizadeh-Hesary, Farhad & Rasoulinezhad, Ehsan & Yoshino, Naoyuki, 2018. "Volatility Linkages between Energy and Food Prices: Case of Selected Asian Countries," ADBI Working Papers 829, Asian Development Bank Institute.
    18. Taghizadeh-Hesary, Farhad & Rasoulinezhad, Ehsan & Yoshino, Naoyuki, 2017. "Trade Linkages and Transmission of Oil Price Fluctuations in a Model Incorporating Monetary Variables," ADBI Working Papers 777, Asian Development Bank Institute.
    19. Roy Kouwenberg & Chenglong Zheng, 2023. "A Review of the Global Climate Finance Literature," Sustainability, MDPI, vol. 15(2), pages 1-32, January.
    20. Bernd Hayo & Britta Niehof, 2013. "Studying International Spillovers in a New Keynesian Continuous Time Framework with Financial Markets," MAGKS Papers on Economics 201342, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).

    More about this item

    Keywords

    Easing of Monetary Policy; the Japanese economy; energy price; Bank of Japan; aging population;
    All these keywords.

    JEL classification:

    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:eab:financ:24520. 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: Shiro Armstrong (email available below). General contact details of provider: https://edirc.repec.org/data/eaberau.html .

    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.