Are monetary transmission channels effective under the quantitative and qualitative easing policy?
Document Type
Article
Publication Date
6-1-2023
Abstract
This study measures the effectiveness of monetary transmission channels of the Bank of Japan's (BOJ) Quantitative and Qualitative Monetary Easing (QQE) policy in affecting Japan's inflation rate. The monetary transmission channels are interest rate, portfolio rebalancing and foreign exchange rate channels. Based on data from 1 August 2013 to 31 October 2019, the Granger's Causality Test showed that the interest rate channel was vital in transmitting the effect of monetary easing. Specifically, the interest rate channel transmitted the effect of QQE, QQE with a negative interest rate and QQE with yield curve control policy to the domestic price level. Portfolio rebalancing and foreign exchange rate channels did not influence Japan's inflation rate in all the QQE policy periods. The empirical results are robust against different estimation methods. Based on the findings, the study offers some imperative policy recommendations.
Keywords
monetary transmission channels, quantitative and qualitative easing, inflation rate, interest rate channel Japan
Divisions
deptdecision
Funders
Faculty of Economics and Administration, Universiti Malaya [Grant no. GPF008P-2019]
Publication Title
Acta Oeconomica
Volume
73
Issue
2
Publisher
Akademiai Kiado
Publisher Location
BUDAFOKI UT 187-189-A-3, H-1117 BUDAPEST, HUNGARY