Macroeconomic Effects of Quantitative and Qualitative Monetary Easing Measures

Abstract

We estimate a structural vector autoregressive model with an effective lower bound (ELB) using Japanese macroeconomic and financial data from the mid-90s to the end of 2016. The estimated results show that the Bank of Japan’s quantitative and qualitative easing (QQE) policy increased output via “pure” quantitative easing when the first-year’s QQE level effect was controlled, complemented by qualitative easing. Our nonlinear counter-factual analyses show that raising the ELB or lowering an inflation threshold in forward guidance is not necessarily contractionary.

Keywords: monetary policy, effective lower bound, forward guidance, structural vector autoregression, maximum likelihood

JEL Classification: E58, E52, C32