A Peek Inside the Black Box The Monetary Transmission Mechanism in Japan

31 Pages Posted: 15 Feb 2006

See all articles by James Morsink

James Morsink

International Monetary Fund (IMF) - Research Department

Tamim Bayoumi

International Monetary Fund (IMF); Centre for Economic Policy Research (CEPR)

Date Written: October 1999

Abstract

This paper uses vector autoregressions to examine the monetary transmission mechanism in Japan. The empirical results indicate that both monetary policy and banks` balance sheets are important sources of shocks, that banks play a crucial role in transmitting monetary shocks to economic activity, that corporations and households have not been able to substitute borrowing from other sources for a shortfall in bank borrowing, and that business investment is especially sensitive to monetary shocks. We conclude that policy measures to strengthen banks are probably a prerequisite for restoring the effectiveness of the monetary transmission mechanism.

Keywords: Monetary transmission mechanism bank behavior

JEL Classification: E50 E51

Suggested Citation

Morsink, James and Bayoumi, Tamim, A Peek Inside the Black Box The Monetary Transmission Mechanism in Japan (October 1999). IMF Working Paper No. 99/137, Available at SSRN: https://ssrn.com/abstract=880664

James Morsink (Contact Author)

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Tamim Bayoumi

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6333 (Phone)
202-623-4795 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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