A Peek Inside the Black Box: The Monetary Transmission Mechanism in Japan

October 1, 1999

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Tamim Bayoumi, and James Morsink. A Peek Inside the Black Box: The Monetary Transmission Mechanism in Japan, (USA: International Monetary Fund, 1999) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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.

Subject: Bank credit, Banking, Financial institutions, Loans, Monetary base, Monetary policy, Monetary transmission mechanism, Money, National accounts, Private investment

Keywords: Asia and Pacific, Bank behavior, Bank credit, Bank loan, Bank weakness, Broad money, Broad money shock, Call rate, Demand, Interest rate, Interest rate channel, Interest rate shock, Loans, Monetary base, Monetary transmission mechanism, Overnight call rate, Private demand, Private investment, WP

Publication Details

Pages:

36
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1999/137
Stock No:

WPIEA1371999
ISBN:

9781451855890
ISSN:

1018-5941

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