Exiting From QE

67 Pages Posted: 3 Feb 2018

See all articles by Fumio Hayashi

Fumio Hayashi

National Graduate Institute for Policy Studies; GRIPS

Junko Koeda

Waseda University - School of Political Science and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 2018


We propose an empirical framework for analyzing the macroeconomic effects of quantitative easing (QE) and apply it to Japan. QE is modeled using a structural regime-switching vector regression framework with two distinct monetary policy rules, endogenous switching between them depending on the size of the policy interest rate and an exit condition for terminating QE that reflects the Bank of Japan’s stated exit criteria. We find that higher reserves at the effective lower bound (ELB) raise inflation and output and that terminating QE may either be contractionary or expansionary depending on the state of the economy at the point of exit.

Keywords: Quantitative Easing, Effective Lower Bound, Structural Vector Autoregression, Monetary Policy, Taylor Rule, Impulse Responses, Bank of Japan

JEL Classification: E58, E52, C32

Suggested Citation

Hayashi, Fumio and Koeda, Junko, Exiting From QE (January 2018). Available at SSRN: https://ssrn.com/abstract=3110345 or http://dx.doi.org/10.2139/ssrn.3110345

Fumio Hayashi

National Graduate Institute for Policy Studies ( email )

Roppongi 7-22-1
Tokyo, 106-0032

HOME PAGE: http://https://sites.google.com/site/fumiohayashi/home

GRIPS ( email )

7-22-1 Roppongi, Minato-Ku
Tokyo 106-8677, Tokyo 106-8677

Junko Koeda (Contact Author)

Waseda University - School of Political Science and Economics ( email )

1-6-1 Nishi-Waseda
Shinjuku-ku, Tokyo 169-8050, Tokyo 169-8050

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