A Peek Inside the Black Box: The Monetary Transmission Mechanism in Japan
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Summary:
This paper uses vector autoregressions to examine the monetary transmission mechanism in Japan. The empirical results indicate that both monetary policy and banks’ balance sheets are important sources of shocks, that banks play a crucial role in transmitting monetary shocks to economic activity, that corporations and households have not been able to substitute borrowing from other sources for a shortfall in bank borrowing, and that business investment is especially sensitive to monetary shocks. We conclude that policy measures to strengthen banks are probably a prerequisite for restoring the effectiveness of the monetary transmission mechanism.
Series:
Working Paper No. 1999/137
Subject:
Bank credit Banking Financial institutions Loans Monetary base Monetary policy Monetary transmission mechanism Money National accounts Private investment
English
Publication Date:
October 1, 1999
ISBN/ISSN:
9781451855890/1018-5941
Stock No:
WPIEA1371999
Pages:
36
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