Regime-switching approach to monetary policy effects |
| |
Authors: | Munehisa Kasuya |
| |
Institution: | 1. Department of Applied Economics, Faculty of Economics and Administration , University of Malaya , Lembah Pantai, Kuala Lumpur 50603, Malaysia ktkwek@um.edu.my;3. Department of Econometrics , Monash University , Clayton Campus, Australia |
| |
Abstract: | Even though monetary policy has kept interest rates at historically low levels, the Japanese economy has experienced long lasting recessions since the 1990s. In this paper, Japanese data are employed to conduct an empirical analysis of changes in the effects of monetary policy on the real economy. It is found that monetary policy effects vary depending on the phase of the business cycle and the lending attitudes diffusion indices. More precisely, policy effects are larger in recession but diminish in extreme recession, and monetary policy is more effective when lenders’ attitudes are severe but less effective when they are excessively severe. |
| |
Keywords: | |
|
|