Spillovers of US unconventional monetary policy: quantitative easing, spreads, and international financial markets

Yıldırım, Zekeriya; İvrendi, Mehmet

doi:10.1186/s40854-021-00299-1

Cited by 19 publications

(20 citation statements)

References 68 publications

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“…Finally, the priced-based measure includes the 10-year term spread and shadow policy rate. Based on the suggestion from Chen et al (2016), Feldkircher et al (2020), Koeda (2019) and Yildirim and Ivrendi (2021), this study adopts the priced-based measure, namely, the 10-year term spread, to capture the impact of the Bank of Japan's QQE policies. The 10-year spread is computed based on the difference between the 10-year Japanese government bond yield and the uncollateralized call rate.…”

Section: Data Empirical Model and Research Methodologymentioning

confidence: 99%

The effect of different periods of unconventional monetary policies on Japanese financial markets

Lau

Yip

2023

JFEP

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Purpose This study aims to examine to what extent the Japanese financial markets are affected by the four periods of unconventional monetary policies (UMP) implemented by the Bank of Japan from 2013 to 2020. Design/methodology/approach Using the daily 10-year term spread as a proxy for monetary easing policy, this study uses four sub-sample periods from 2013 to 2020 to look into the effectiveness of UMP on the Japanese financial markets. Findings Our result shows that not all of the Bank of Japan's unconventional monetary policies are equally effective in influencing the Japanese financial markets. In particular, the QQE policy implemented from April 2013 to October 2014 effectively influenced the stock market, banking sector and foreign exchange market. However, the financial market impact of monetary policy is muted during the QQE expansion period. Likewise, the QQE with a negative interest rate policy influences only the banking sector. Finally, the QQE with its yield curve control policy effectively impacts the financial markets. Research limitations/implications This research can be expanded by studying the international spillover effect of the Bank of Japan's UMP on the financial markets in Asian countries. Practical implications The findings of this study enable investors to understand the causal relationship between the Bank of Japan's UMP and the financial market indicators, thereby helping them to position their portfolio investments. From the policy perspective, the finding is useful to inform the Bank of Japan on which policy is relatively effective in affecting the financial markets. In light of the empirical finding, the Bank of Japan should continue to pursue the QQE YCCP or revert to the initial QQE policy, as the two policies are relatively more effective than the QQE expansion and QQE NIRP in affecting the Japanese financial markets. Social implications The empirical finding highlights the importance of controlling for the impact of different QQE policies in the model. Future research may consider conducting sub-sample analysis to cater to the different QQE policy regimes. This approach provides a clearer picture and valid inferences on the financial market impact of each QQE policy. Originality/value This study provides a comprehensive analysis of the impact of Bank of Japan's QQE on the Japanese financial markets. For the market participants, the findings of this study suggest that investors should closely gauge the development of the unconventional monetary policies of the Bank of Japan because the monetary easing policy influences the decision-making process of commercial banks, pension funds, mutual funds, retail investors and other stakeholders in the financial markets. The policy twist will have future ramifications for their loan, investment and retirement fund portfolios.

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Section: Data Empirical Model and Research Methodologymentioning

confidence: 99%

The effect of different periods of unconventional monetary policies on Japanese financial markets

Lau

Yip

2023

JFEP

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Section: Related Workmentioning

confidence: 99%

“…The empirical evidence is as follows: Yildirim and Ivrendi [ 7 ] extend the univariate ARMA model to multiple variables and test the model's effectiveness with forecasts of export effects for Sweden. A univariate ARIMA model based on a Bayesian search algorithm is presented in [ 7 ], which is empirically shown to be less effective in predicting seasonal models than nonseasonal models. In [ 8 ], a neural network model was used to forecast the export of DOC in Scotland, and methods such as increasing the sample size and improving the parameters were proposed to improve the accuracy of the model.…”

Section: Related Workmentioning

confidence: 99%

China’s Economic Forecast Based on Machine Learning and Quantitative Easing

Qiu

2022

Computational Intelligence and Neuroscience

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In this paper, six variables, including export value, real exchange rate, Chinese GDP, and US IPI, and their seasonal variables, are used as determinants to model and forecast China’s export value to the US using three methods: BP neural network, ARIMA, and AR-GARCH. Error indicators were chosen to compare the simulated and predicted results of the three models with the real values. It is found that the results of all three models are satisfactory, although there are some differences in their simulation and forecasting capabilities, but the ARIMA model has a clear advantage. This paper analyses the reasons for these results and proposes suggestions for improving China’s exports in the context of the models.

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“…However, it is also noticeable that for both nations, QE modestly increases inflation at the same time it boosts GDP. An increase in consumer demand and money supply indicates an increase in inflation since QE promotes economic expenditure [9,10].…”

Section: Comparison Between Us and Japanmentioning

confidence: 99%

Comparative Analysis of the Impact of Quantitative Easing on the United States and Japan

Zeng¹

2022

BCPBM

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Quantitative easing is a nonconventional expansionary policy that has been used in times of economic downturns. It has significantly impacted different economies in the past. In these past years, Covid-19 has had a huge influence over the world and negatively affected the economy, it has brought society’s attention to quantitative easing as a solution to recession. This article uses a comparative analysis of historical data (federal funds rate, bank balance sheet, etc) to analyze the impact of past quantitative easing on the economy in the US and Japan. The result is that in both economies, past QE is effective in helping the economy recover in a short time. The reason behind the policy-making decision and the result of quantitative easing in the US and Japan is very similar, the strategy while implementing quantitative easing is also identical. Proving that QE has a similar impact on the US and Japan’s economic system. This indicates that in the future other countries can take into consideration of QE’s effect on the US and Japan when making economic decisions.

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Spillovers of US unconventional monetary policy: quantitative easing, spreads, and international financial markets

Cited by 19 publications

References 68 publications

The effect of different periods of unconventional monetary policies on Japanese financial markets

The effect of different periods of unconventional monetary policies on Japanese financial markets

China’s Economic Forecast Based on Machine Learning and Quantitative Easing

Comparative Analysis of the Impact of Quantitative Easing on the United States and Japan

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