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A Structural VAR Analysis of the Monetary Policy Stance in Japan

  • Kazuhiko Nakahira
Article

Abstract

This paper empirically investigates the validity of the Bank of Japan’s policy stance after the collapse of the “Bubble Economy” by utilizing structural vector autoregression analysis. Specifically, examination of the validity of the “interest rate targeting policy” and the “reserve targeting policy” are conducted with two different identifying restrictions constructed for each policy scheme. Impulse response and forecast error variance decomposition analyses provide affirmative results for the interest rate targeting policy in the sample period of “zero interest rate policy”, while they provide positive findings for the reserve targeting policy in the period of “quantitative easing policy”. On the whole, it can be concluded that the policy stances by the Bank of Japan in the period of concern are valid.

Keywords

policy stance operating procedure operating variable monetary policy structural vector autoregression 

JEL classification

E52 E58 C32 

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Copyright information

© Japan Economic Policy Association (JEPA) 2009

Authors and Affiliations

  • Kazuhiko Nakahira
    • 1
  1. 1.Department of Business Administration and InformationTokyo University of ScienceSuwaJapan

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