The effectiveness of quantitative easing: Evidence from Japan

Abstract

This study contributes to current research on quantitative easing. We provide a novel analysis of the quantitative easing effectiveness as an unconventional monetary policy tool in Japan over the last two decades. The paper advances current research on quantitative easing by exploring quantitative easing through the prism of the monetary transmission mechanism. We examine the response of Japanese Regional Banks to the quantitative easing operations conducted by the Bank of Japan from the early 2000s till 2015. The analysis is performed within the framework of the bank lending channel under the unconventional monetary policy strategies. We find that small-sized regional banks underline the significant positive effect of quantitative easing on gross domestic product and inflation that works through the securities holdings and leverage preferences. Monetary authorities should pay particular attention to policies for such banks and banks with a high level of non-performing loans. Deposit growth after a quantitative easing shock is only present in large sized banks with low NPLs holdings.

The Spillover Effects of the US Unconventional Monetary Policy: New Evidence from Asian Developing Countries

“…In the same vein, Matousek et al (2019) gauge the quantitative easing shock from the Bank of Japan as the current account balance changes. With a focus on the bank lending channel, the authors explore the effect of quantitative easing conducted by the Bank of Japan on the assets and liabilities composition of regional banks by applying a Panel VAR.…”

The impact of unconventional monetary policy in the euro area. Structural and scenario analysis from a Bayesian VAR

“…Iwata and Wu (2006) in their study for Japan, show that monetary authorities can rely on quantitative measures to conduct an effective monetary policy when the interest rate is at the zero-lower bound. Empirical evidence on this direction is also provided by Matousek, Papadamou, Ševi c, and Tzeremes (2019) and Girardin and Moussa (2011) who show that QE was able not only to prevent further recession and deflation but also to stimulate output and prices. Furthermore, although Schenkelberg and Watzka (2013) argue that the implementation of QE has a temporary and weak impact on output and prices, they argue that the situation would have been much worse if only conventional monetary policy tools had been implemented.…”

The real effects of banks' corporate credit supply: A literature review

“…Huang (2003), for example, provide evidence for the United Kingdom, Gambacorta (2005) for Italy, Gunji and Yuan (2010) for China, Cetorelli and Goldberg (2011) for emerging markets, Puri et al (2011) for Germany, Fungáčová et al (2014) for the Euro area. Matousek et al (2019) and Morais et al (2019), instead, observe that banks also pass on positive shocks to their borrowers by increasing credit supply in Japan and Mexico, respectively.…”