New evidence on the effectiveness of 'Quantitative Easing' in Japan

Central banks have recently introduced new policy initiatives, including a policy called ‘Quantitative Easing’ (QE). Since it has been argued by the Bank of England that “Standard economic models are of limited use in th
Central banks have recently introduced new policy initiatives, including a policy called ‘Quantitative Easing’ (QE). Since it has been argued by the Bank of England that “Standard economic models are of limited use in these unusual circumstances, and the empirical evidence is extremely limited” (Bank of England, 2009b), we have taken an entirely empirical approach and have focused on the QE-experience, on which substantial data is available, namely that of Japan (2001-2006). Recent literature on the effectiveness of QE has neglected any reference to final policy goals. In this paper, we adopt the view that ultimately effectiveness will be measured by whether it will be able to “boost spending” (Bank of England, 2009b) and “will ultimately be judged by their impact on the wider macroeconomy” (Bank of England, 2010). In line with a widely held view among leading macroeconomists from various persuasions, while attempting to stay agnostic and open-minded on the distribution of demand changes between real output and inflation, we have thus identified nominal GDP growth as the key final policy goal of monetary policy. The empirical research finds that the policy conducted by the Bank of Japan between 2001 and 2006 makes little empirical difference while an alternative policy targeting credit creation (the original definition of QE) would likely have been more successful.
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Metadaten
Author:Konstantinos Voutsinas, Richard A. Werner
URN:urn:nbn:de:hebis:30:3-241143
Series (Serial Number):CFS working paper series (2011, 30)
Publisher:Goethe-Univ., House of Finance, Center for Financial Studies
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Date of Publication (online):2012/02/07
Year of first Publication:2011
Publishing Institution:Univ.-Bibliothek Frankfurt am Main
Release Date:2012/02/07
Tag:Central Banking; General-to-specific Methodology; Monetary Policy; Nominal GDP Growth; Quantitative Easing
Pagenumber:33
HeBIS PPN:312203055
Institutes:Center for Financial Studies (CFS)
Dewey Decimal Classification:332 Finanzwirtschaft
JEL-Classification:E41 Demand for Money
E52 Monetary Policy
E58 Central Banks and Their Policies
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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