Is there a direct effect of money?. Money's role in an estimated monetary business cycle model of the Japanese economy

Research output: Contribution to journalArticle

5 Citations (Scopus)


In this paper, to study the alternative monetary transmission mechanism to the traditional interest rate channel which may even work under zero nominal interest rates, we estimate the monetary business cycle model of the Japanese economy that incorporates the direct role of money. Estimation is conducted on the system of equations in a state-space form via maximum likelihood estimation. We, however, find that the direct effect of money is extremely small in Japan. This finding is the same as those obtained for the U.S. in Ireland [Ireland, P., 2004. Money's role in the monetary business cycle. Journal of Money, Credit and Banking 36, 969-984] and the Euro area in Andres et al. [Andres, J., Lopez-Salido, D., Valles, J., 2001. Money in an Estimated Business Cycle Model of the Euro area. Working Paper 121, Bank of Spain].

Original languageEnglish
Pages (from-to)329-337
Number of pages9
JournalJapan and The World Economy
Issue number3
Publication statusPublished - 2007 Aug 1



  • Cross-restriction
  • Direct effect of money
  • Dynamic stochastic general equilibrium model
  • Maximum likelihood estimation

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics
  • Political Science and International Relations

Cite this