The macroeconomic effects of monetary policy: Evidence from Japan |
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| Institution: | 1. Yokohama City University, Japan;2. Cabinet Office the Government of Japan, Yokohama City University, Japan;1. Department of Economics, University of Hawai`i. Address: 2424 Maile Way, Saunders 542, Honolulu, Hawaii 96822, United States;2. College of Economics, Aoyama Gakuin University, and Research Associate, The Research Institute of Economy, Trade and Industry (RIETI). Address: 4-4-25 Shibuya, Shibuya-ku, Tokyo 150-8366, Japan;1. Chiba University, 1-33 Yayoi-cho, Inage-ku, Chiba-shi, Chiba 263-8522, Japan;2. Hosei University, 4342 Aihara-machi, Machida-shi, Tokyo 194-0298, Japan;3. Economic and Social Research Institute, Cabinet Office, 1-6-1 Nagata-cho, Chiyoda-ku, Tokyo 100-8914, Japan;1. Gakushuin University and RIETI, Japan;2. Rissho University, Japan;3. Graduate School of Economics, Hitotsubashi University, Japan;1. Institute of Economic Research, Hitotsubashi University, 2-1 Naka, Kunitachi, Tokyo 186-8601, Japan;2. Research Institute of Economy, Trade and Industry (RIETI), 1-3-1 Kasumigaseki, Chiyoda-ku, Tokyo 100-8901, Japan |
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| Abstract: | This study examines the macroeconomic effects of monetary policy in Japan. We apply the new identification strategy proposed by Bu et al. (2021) to the Japanese case and estimate monetary policy shocks that bridge periods of conventional and unconventional monetary policymaking. We show the macroeconomic effects of monetary policy; a contractionary monetary policy shock significantly decreases output and inflation rates even under the effective lower bound. However, because the shorter-term and longer-term nominal interest rates are already close to zero, the magnitude of monetary policy shocks on the macroeconomic variables is modest. |
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