Spillovers from Japan’s Unconventional Monetary Policy to Emerging Asia: a Global VAR approach
IMF Working Papers, May 20, 2016
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- Spillovers from Japan’s Unconventional Monetary Policy to Emerging Asia: a Global VAR approach
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Bibliographic details
- Authors: Giovanni Ganelli, Nour Tawk
- Published: May 20, 2016
- Series: IMF Working Papers
Summary
- Study uses a Global VAR model to analyze spillovers from the Bank of Japan’s quantitative and qualitative easing (QQE) on emerging Asia.
- Main result: despite an appreciation of emerging Asia currencies vis-à-vis the yen, the impact on emerging Asia’s GDP tended to be positive and significant.
- Interpretation: the positive effect of QQE on expectations, by improving confidence, more than offset negative exchange rate spillovers from expenditure switching toward Japanese goods.
- Channels indicated: spillovers likely operated mainly through expectations and improved confidence—captured by increases in equity prices—rather than through balance sheet adjustments captured by movements in the monetary base.
Key findings and statistics
- Impact on emerging Asia’s GDP: positive and significant (as stated).
- Exchange rate response: appreciation of emerging Asia currencies vis-à-vis the yen.
- Mechanism emphasis:
- Equity prices increased, capturing the expectations/confidence channel.
- Monetary base movements played a lesser role, suggesting limited balance sheet transmission.
Policy-relevant implications
- Unconventional monetary policy in a major economy can generate net positive output spillovers to emerging Asia through confidence and equity price channels even when their currencies appreciate.
- Monitoring equity market responses and confidence indicators may be more informative for spillover effects from QQE-like policies than focusing solely on monetary base measures.
Subject classification and keywords (as provided)
- Subject: Exchange rates, Financial institutions, Foreign exchange, Inflation, Monetary base, Monetary policy, Money, Prices, Stocks, Unconventional monetary policies
- Keywords: Asia and Pacific, currency appreciation, Emerging Asia, equity price, equity price increase, equity price shock, Europe, Exchange rates, Global, Inflation, interest rate, Japan, Japan MSCI index, Japan's price competitiveness, Japan's QQE, Japan's quantitative easing program, Monetary base, net export, price, price boom, QQE, QQE in Japan, Spillovers, stock price effect, Stocks, Unconventional monetary policies, WP
Content in this bundle
- _wp1699 — GVAR analysis of Japan’s QQE spillovers