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The Effectiveness Of Nontraditional Monetary Policy: The Case Of Japan

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  • Yuzo Honda

    (Kansai University)

Abstract

The effectiveness of nontraditional monetary policy is controversial at least in Japan. Making use of data from the quantitative easing monetary policy period, this paper presents statistical evidence on the effectiveness of nontraditional monetary policy. We empirically demonstrate that quantitative easing monetary policy, adopted by the Bank of Japan for the period from March 2001 to March 2006, had a stimulating effect on investment and production at least through Tobin's q channel. We also provide a simple and operational model in which an injection of base money lowers the interest rate on bonds, reduces the required rate of returns from capital stocks, and depreciates the value of domestic currency.

Suggested Citation

  • Yuzo Honda, 2013. "The Effectiveness Of Nontraditional Monetary Policy: The Case Of Japan," Discussion Papers in Economics and Business 13-25, Osaka University, Graduate School of Economics.
    • Handle: RePEc:osk:wpaper:1325
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    References listed on IDEAS

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    7. Clouse James & Henderson Dale & Orphanides Athanasios & Small David H. & Tinsley P.A., 2003. "Monetary Policy When the Nominal Short-Term Interest Rate is Zero," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-65, September.
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    9. 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.
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    More about this item

    Keywords

    V Quantitative Easing; Vector Autoregressions; Stocks; Tobin's q; Asset Markets;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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