DP1733 Identifying Monetary Policy Shocks in Japan

Author(s): Etsuro Shioji
Publication Date: October 1997
Keyword(s): Identification, Monetary Policy, Structural VAR
JEL(s): C32, E52, E58
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=1733

It is sometimes argued that central banks influence the private economy in the short run through controlling a specific component of high powered money, not its total amount. Using a structural VAR approach, this paper evaluates this claim empirically, in the context of the Japanese economy. It estimates a model based on the standard view that the central bank controls the total amount of high powered money, and another model based on the alternative view that it controls only a specific component. It is shown that the former yields much more sensible estimates than the latter.