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An Injection Of Base Money At Zero Interest Rates: Empirical Evidence From The Japanese Experience 2001-2006

Author

Listed:
  • Yuzo Honda

    (School of Economics, Osaka University)

  • Yoshihiro Kuroki

    (Chuo University)

  • Minoru Tachibana

    (Osaka Prefecture University)

Abstract

Many macroeconomists and policymakers have debated the effectiveness of the quantitative monetary-easing policy (QMEP) that was introduced in Japan in 2001. This paper measures the effect of the QMEP on aggregate output and prices, and examines its transmission mechanism, based on the vector autoregressive (VAR) methodology. To ascertain the transmission mechanism, we include several financial market variables in the VAR system. The results show that the QMEP increased aggregate output through the stock price channel. This evidence suggests that further injection of base money is effective even when short-term nominal interest rates are at zero.

Suggested Citation

  • Yuzo Honda & Yoshihiro Kuroki & Minoru Tachibana, 2007. "An Injection Of Base Money At Zero Interest Rates: Empirical Evidence From The Japanese Experience 2001-2006," Discussion Papers in Economics and Business 07-08, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:0708
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    More about this item

    Keywords

    Quantitative easing; Money injection; Portfolio rebalancing; Stock price channel; Vector autoregression;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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