Were there structural breaks in the effects of Japanese monetary policy? Re-evaluating policy effects of the lost decade

Tomoo Inoue; Tatsuyoshi Okimoto

doi:10.1016/j.jjie.2007.11.002

Were there structural breaks in the effects of Japanese monetary policy? Re-evaluating policy effects of the lost decade

Tomoo Inoue, Tatsuyoshi Okimoto

Research output: Contribution to journal › Article › peer-review

32 Citations (Scopus)

Abstract

This paper employs block recursive structural VAR models with Markov switching for modeling monetary policy and private sector behavior of the Japanese economy. By estimating the endogenous structural breaks, we investigate the existence, number, and nature of breaks possibly implied by the monetary policy adopted between 1975 and 2002. Results indicate that the Japanese economic system is best described by a non-absorbing two-state model, with major break happened around 1996. We also confirm that the interest rate monetary policy was effective before 1996, while monetary base shocks are identified as monetary policy shocks only after 1996. J. Japanese Int. Economies 22 (3) (2008) 320-342.

Original language	English
Pages (from-to)	320-342
Number of pages	23
Journal	Journal of The Japanese and International Economies
Volume	22
Issue number	3
DOIs	https://doi.org/10.1016/j.jjie.2007.11.002
Publication status	Published - 2008 Sept
Externally published	Yes

Keywords

MCMC
Markov switching
Monetary policy
VAR

ASJC Scopus subject areas

Finance
Economics and Econometrics
Political Science and International Relations

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10.1016/j.jjie.2007.11.002

Cite this

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title = "Were there structural breaks in the effects of Japanese monetary policy? Re-evaluating policy effects of the lost decade",

abstract = "This paper employs block recursive structural VAR models with Markov switching for modeling monetary policy and private sector behavior of the Japanese economy. By estimating the endogenous structural breaks, we investigate the existence, number, and nature of breaks possibly implied by the monetary policy adopted between 1975 and 2002. Results indicate that the Japanese economic system is best described by a non-absorbing two-state model, with major break happened around 1996. We also confirm that the interest rate monetary policy was effective before 1996, while monetary base shocks are identified as monetary policy shocks only after 1996. J. Japanese Int. Economies 22 (3) (2008) 320-342.",

keywords = "MCMC, Markov switching, Monetary policy, VAR",

author = "Tomoo Inoue and Tatsuyoshi Okimoto",

note = "Funding Information: We are grateful to Ippei Fujiwara, Fumio Hayashi, Takeo Hoshi, Ryuzo Miyao, Etsuro Shioji, Yoshihiko Tsukuda, Toshiaki Watanabe, and seminar participants at the Tohoku University, Kobe University, Hitotsubashi University, Meisei University, and the Bank of Japan for helpful comments. We also thank an anonymous referee for many helpful suggestions. This research is partly financed by Seikei University Research Grant. ",

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doi = "10.1016/j.jjie.2007.11.002",

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AU - Inoue, Tomoo

AU - Okimoto, Tatsuyoshi

N1 - Funding Information: We are grateful to Ippei Fujiwara, Fumio Hayashi, Takeo Hoshi, Ryuzo Miyao, Etsuro Shioji, Yoshihiko Tsukuda, Toshiaki Watanabe, and seminar participants at the Tohoku University, Kobe University, Hitotsubashi University, Meisei University, and the Bank of Japan for helpful comments. We also thank an anonymous referee for many helpful suggestions. This research is partly financed by Seikei University Research Grant.

PY - 2008/9

Y1 - 2008/9

N2 - This paper employs block recursive structural VAR models with Markov switching for modeling monetary policy and private sector behavior of the Japanese economy. By estimating the endogenous structural breaks, we investigate the existence, number, and nature of breaks possibly implied by the monetary policy adopted between 1975 and 2002. Results indicate that the Japanese economic system is best described by a non-absorbing two-state model, with major break happened around 1996. We also confirm that the interest rate monetary policy was effective before 1996, while monetary base shocks are identified as monetary policy shocks only after 1996. J. Japanese Int. Economies 22 (3) (2008) 320-342.

AB - This paper employs block recursive structural VAR models with Markov switching for modeling monetary policy and private sector behavior of the Japanese economy. By estimating the endogenous structural breaks, we investigate the existence, number, and nature of breaks possibly implied by the monetary policy adopted between 1975 and 2002. Results indicate that the Japanese economic system is best described by a non-absorbing two-state model, with major break happened around 1996. We also confirm that the interest rate monetary policy was effective before 1996, while monetary base shocks are identified as monetary policy shocks only after 1996. J. Japanese Int. Economies 22 (3) (2008) 320-342.

KW - MCMC

KW - Markov switching

KW - Monetary policy

KW - VAR

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Were there structural breaks in the effects of Japanese monetary policy? Re-evaluating policy effects of the lost decade

Abstract

Keywords

ASJC Scopus subject areas

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