TY - JOUR
T1 - Output composition of the monetary policy transmission mechanism in Japan
AU - Fujiwara, Ippei
N1 - Copyright:
Copyright 2018 Elsevier B.V., All rights reserved.
PY - 2004
Y1 - 2004
N2 - In this paper, we investigate the output composition of the monetary policy transmission mechanism in Japan. The predominant channel through which monetary policy affects output in Japan is usually thought to be the investment channel, namely the process whereby a change in the interest rate alters the cost of capital and therefore investment. In the United States, however, the consumption channel, which works through intertemporal substitution, is commonly considered the more significant of the two. The aim of this paper is twofold: 1) based on analysis using VAR models to understand which of the two channels, the consumption channel or the investment channel, plays the more important role in the transmission of the Japanese monetary policy: and 2) to contribute to the research on what Angeloni, Kashyap, Mojon and Terlizzese (2003) term the "Output Composition Puzzle," referring to the fact that whereas in the United States the predominant driver of output changes is the consumption channel, in the Euro area it is the investment channel. Results obtained from the Japanese models imply that the investment channel is more important.
AB - In this paper, we investigate the output composition of the monetary policy transmission mechanism in Japan. The predominant channel through which monetary policy affects output in Japan is usually thought to be the investment channel, namely the process whereby a change in the interest rate alters the cost of capital and therefore investment. In the United States, however, the consumption channel, which works through intertemporal substitution, is commonly considered the more significant of the two. The aim of this paper is twofold: 1) based on analysis using VAR models to understand which of the two channels, the consumption channel or the investment channel, plays the more important role in the transmission of the Japanese monetary policy: and 2) to contribute to the research on what Angeloni, Kashyap, Mojon and Terlizzese (2003) term the "Output Composition Puzzle," referring to the fact that whereas in the United States the predominant driver of output changes is the consumption channel, in the Euro area it is the investment channel. Results obtained from the Japanese models imply that the investment channel is more important.
KW - Monetary Policy Transmission
KW - Output Composition Puzzle
KW - VAR
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U2 - 10.2202/1534-5998.1178
DO - 10.2202/1534-5998.1178
M3 - Article
AN - SCOPUS:15044358623
VL - 4
JO - Topics in Macroeconomics
JF - Topics in Macroeconomics
SN - 1534-5998
IS - 1
M1 - 11
ER -