Quantifying Forward Guidance and Yield Curve Control
36 Pages Posted: 9 Jan 2024 Last revised: 17 Jan 2024
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Quantifying Forward Guidance and Yield Curve Control
Quantifying Forward Guidance and Yield Curve Control
Date Written: December 27, 2023
Abstract
This paper evaluates the effectiveness of Japanese unconventional monetary policies over the past quarter century within a unified term structure framework. It specifically examines the impact of the Bank of Japan's outcome-based forward guidance and yield curve control (YCC), while also incorporating other policy types into the framework. The findings highlight that both the BOJ's forward guidance and YCC have had a significant influence on the shadow rate. Forward guidance accounted for most of the policy impact in the early stages of unconventional monetary policies and remained influential throughout. YCC, since its introduction in 2016 until March 2022, contributed to over a third of the policy impact. Furthermore, these policies have been effective in raising output and inflation.
Keywords: Forward guidance, effective lower bound (ELB), liftoff, term structure, shadow rate, macro finance, unspanned macro factors, yield curve control, Japan
JEL Classification: E43, E44, E52, E58
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