A1056
Title: Macroeconomic effects of unconventional monetary policy in Japan: An analysis using narrative sign restrictions
Authors: Shumpei Fujita - University of Tokyo (Japan) [presenting]
Hirokuni Iiboshi - Nihon University (Japan)
Mototsugu Shintani - University of Tokyo (Japan)
Abstract: The purpose is to evaluate the macroeconomic effects of the unconventional monetary policy (UMP) in Japan. To identify UMP shocks, narrative sign restrictions are imposed on structural shocks and historical decompositions by using three significant episodes during Governor Haruhiko Kuroda's tenure related to quantitative and qualitative monetary easing (QQE). Results indicate that expansionary UMP shock increases both output and inflation rates. The exchange rates, stock prices, and bank loans also respond to the UMP shock consistently with the predictions of standard macroeconomic theory, implying that the exchange rate channel, the asset price channel, and the credit channel function for the transmission channel of unconventional monetary policy to the real economy. Furthermore, findings indicate that using the narrative sign restrictions independently or complementarily eliminates the puzzling responses of some variables that occur when using the Cholesky decomposition and also eliminates the problem of the wide credible intervals that tend to occur when using standard sign restrictions for identification.
