[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/48709.html
   My bibliography  Save this paper

Not all international monetary shocks are alike for the Japanese economy

Author

Listed:
  • Vespignani, Joaquin L.
  • Ratti, Ronald A.
Abstract
It is found that over 1999:1-2012:12 China’s monetary expansion influences Japan through the effect of China’s growth on world commodity prices, increased demand for imports, and exchange rate policy. China’s monetary expansion is associated with significant increases in Japan’s industrial production, exports and inflation, and decreases in the trade-weighted yen. In contrast, U.S. monetary expansion results in contraction in Japan’s industrial production, exports and trade balance (expenditure-switching). Monetary expansion in the Euro area does not significantly affect Japan. Structural vector error correction models are estimated. Results are robust to various contemporaneous restrictions for the effect of international monetary variables, the interaction of foreign and domestic variables and to factor augmented VAR to identify monetary shocks.

Suggested Citation

  • Vespignani, Joaquin L. & Ratti, Ronald A., 2013. "Not all international monetary shocks are alike for the Japanese economy," MPRA Paper 48709, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:48709
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/48709/1/MPRA_paper_48709.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Uhlig, Harald, 2005. "What are the effects of monetary policy on output? Results from an agnostic identification procedure," Journal of Monetary Economics, Elsevier, vol. 52(2), pages 381-419, March.
    2. Fabrizio Perri & Vincenzo Quadrini, 2018. "International Recessions," American Economic Review, American Economic Association, vol. 108(4-5), pages 935-984, April.
    3. Svensson, Lars E O & van Wijnbergen, Sweder, 1989. "Excess Capacity, Monopolistic Competition, and International Transmission of Monetary Disturbances," Economic Journal, Royal Economic Society, vol. 99(397), pages 785-805, September.
    4. Alquist, Ron & Kilian, Lutz & Vigfusson, Robert J., 2013. "Forecasting the Price of Oil," Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.), Handbook of Economic Forecasting, edition 1, volume 2, chapter 0, pages 427-507, Elsevier.
    5. Koray, Faik & McMillin, W. Douglas, 1999. "Monetary shocks, the exchange rate, and the trade balance," Journal of International Money and Finance, Elsevier, vol. 18(6), pages 925-940, December.
    6. Nagayasu, Jun, 2007. "Empirical analysis of the exchange rate channel in Japan," Journal of International Money and Finance, Elsevier, vol. 26(6), pages 887-904, October.
    7. Carstensen, Kai, 2006. "Stock Market Downswing and the Stability of European Monetary Union Money Demand," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 395-402, October.
    8. Filippo di Mauro & L. Vanessa Smith & Stephane Dees & M. Hashem Pesaran, 2007. "Exploring the international linkages of the euro area: a global VAR analysis," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(1), pages 1-38.
    9. Christiano, Lawrence J. & Eichenbaum, Martin & Evans, Charles L., 1999. "Monetary policy shocks: What have we learned and to what end?," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 2, pages 65-148, Elsevier.
    10. Haroon Mumtaz & Paolo Surico, 2009. "The Transmission of International Shocks: A Factor-Augmented VAR Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(s1), pages 71-100, February.
    11. Granville, Brigitte & Mallick, Sushanta & Zeng, Ning, 2011. "Chinese exchange rate and price effects on G3 import prices," Journal of Asian Economics, Elsevier, vol. 22(6), pages 427-440.
    12. Lance J. Bachmeier & Norman R. Swanson, 2005. "Predicting Inflation: Does The Quantity Theory Help?," Economic Inquiry, Western Economic Association International, vol. 43(3), pages 570-585, July.
    13. Yoshiyasu Ono, 2006. "International Asymmetry In Business Activity And Appreciation Of A Stagnant Country'S Currency," The Japanese Economic Review, Japanese Economic Association, vol. 57(1), pages 101-120, March.
    14. Nakashima, Kiyotaka & Saito, Makoto, 2012. "On the comparison of alternative specifications for money demand: The case of extremely low interest rate regimes in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 26(3), pages 454-471.
    15. A. Anzuini & M. J. Lombardi & P. Pagano, 2013. "The Impact of Monetary Policy Shocks on Commodity Prices," International Journal of Central Banking, International Journal of Central Banking, vol. 9(3), pages 125-150, September.
    16. Ryu‐ichiro Murota & Yoshiyasu Ono, 2012. "Zero Nominal Interest Rates, Unemployment, Excess Reserves And Deflation In A Liquidity Trap," Metroeconomica, Wiley Blackwell, vol. 63(2), pages 335-357, May.
    17. Cai Zongwu & Chen Linna & Fang Ying, 2012. "A New Forecasting Model for USD/CNY Exchange Rate," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 16(3), pages 1-20, September.
    18. Kunst, Robert M, 1993. "Seasonal Cointegration in Macroeconomic Systems: Case Studies for Small and Large European Countries," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 325-330, May.
    19. Dedola, Luca & Lippi, Francesco, 2005. "The monetary transmission mechanism: Evidence from the industries of five OECD countries," European Economic Review, Elsevier, vol. 49(6), pages 1543-1569, August.
    20. Fujiwara, Ippei, 2007. "Is there a direct effect of money?: Money's role in an estimated monetary business cycle model of the Japanese economy," Japan and the World Economy, Elsevier, vol. 19(3), pages 329-337, August.
    21. Whalley, John & Wang, Li, 2011. "The impacts of Renminbi appreciation on trade flows and reserve accumulation in a monetary trade model," Economic Modelling, Elsevier, vol. 28(1-2), pages 614-621, January.
    22. Fabio Canova, 2005. "The transmission of US shocks to Latin America," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(2), pages 229-251.
    23. Kim, Soyoung, 1999. "Do monetary policy shocks matter in the G-7 countries? Using common identifying assumptions about monetary policy across countries," Journal of International Economics, Elsevier, vol. 48(2), pages 387-412, August.
    24. Ben S. Bernanke & Jean Boivin & Piotr Eliasz, 2005. "Measuring the Effects of Monetary Policy: A Factor-Augmented Vector Autoregressive (FAVAR) Approach," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(1), pages 387-422.
    25. Cheng, Wenli & Zhang, Dingsheng, 2012. "A monetary model of China–US trade relations," Economic Modelling, Elsevier, vol. 29(2), pages 233-238.
    26. Sims, Christopher A. & Zha, Tao, 2006. "Does Monetary Policy Generate Recessions?," Macroeconomic Dynamics, Cambridge University Press, vol. 10(2), pages 231-272, April.
    27. Yoshiyasu Ono & Kazuo Ogawa & Atsushi Yoshida, 2004. "The Liquidity Trap And Persistent Unemployment With Dynamic Optimizing Agents: Empirical Evidence," The Japanese Economic Review, Japanese Economic Association, vol. 55(4), pages 355-371, December.
    28. Anders C. Johansson, 2012. "China’s Growing Influence in Southeast Asia – Monetary Policy and Equity Markets," The World Economy, Wiley Blackwell, vol. 35(7), pages 816-837, July.
    29. Ratti, Ronald A. & Vespignani, Joaquin L., 2013. "Liquidity and crude oil prices: China's influence over 1996–2011," Economic Modelling, Elsevier, vol. 33(C), pages 517-525.
    30. Kazi, Irfan Akbar & Wagan, Hakimzadi & Akbar, Farhan, 2013. "The changing international transmission of U.S. monetary policy shocks: Is there evidence of contagion effect on OECD countries," Economic Modelling, Elsevier, vol. 30(C), pages 90-116.
    31. John B. Taylor, 2012. "The Great Deviation," Book Chapters, in: Evan F. Koenig & Robert Leeson & George A. Kahn (ed.), The Taylor Rule and the Transformation of Monetary Policy, chapter 7, Hoover Institution, Stanford University.
    32. Pesaran M.H. & Schuermann T. & Weiner S.M., 2004. "Modeling Regional Interdependencies Using a Global Error-Correcting Macroeconometric Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 22, pages 129-162, April.
    33. Fang, Ying & Huang, Shicheng & Niu, Linlin, 2012. "De facto currency baskets of China and East Asian economies: The rising weights," BOFIT Discussion Papers 2/2012, Bank of Finland Institute for Emerging Economies (BOFIT).
    34. John C. Williams & John B. Taylor, 2009. "A Black Swan in the Money Market," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 58-83, January.
    35. Gordon, David B & Leeper, Eric M, 1994. "The Dynamic Impacts of Monetary Policy: An Exercise in Tentative Identification," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1228-1247, December.
    36. Angela Abbate & Sandra Eickmeier & Wolfgang Lemke & Massimiliano Marcellino, 2016. "The Changing International Transmission of Financial Shocks: Evidence from a Classical Time‐Varying FAVAR," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(4), pages 573-601, June.
    37. repec:zbw:bofitp:2012_002 is not listed on IDEAS
    38. Lutz Kilian & Bruce Hicks, 2013. "Did Unexpectedly Strong Economic Growth Cause the Oil Price Shock of 2003–2008?," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 32(5), pages 385-394, August.
    39. Huayu Sun, 2009. "Autonomy and Effectiveness of Chinese Monetary Policy under the De Facto Fixed Exchange Rate System," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 17(3), pages 23-38, May.
    40. di Giovanni, Julian & Shambaugh, Jay C., 2008. "The impact of foreign interest rates on the economy: The role of the exchange rate regime," Journal of International Economics, Elsevier, vol. 74(2), pages 341-361, March.
    41. Yiping Huang & Peichu Xie & Jiao Wang, 2014. "International Transmission of the People's Bank of China's Balance Sheet Expansion," Asian Economic Policy Review, Japan Center for Economic Research, vol. 9(2), pages 276-296, July.
    42. Cover, James P. & Mallick, Sushanta K., 2012. "Identifying sources of macroeconomic and exchange rate fluctuations in the UK," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1627-1648.
    43. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "Exchange Rate Dynamics Redux," Journal of Political Economy, University of Chicago Press, vol. 103(3), pages 624-660, June.
    44. Haroon Mumtaz & Paolo Surico, 2012. "Evolving International Inflation Dynamics: World And Country-Specific Factors," Journal of the European Economic Association, European Economic Association, vol. 10(4), pages 716-734, August.
    45. MacKinnon, James G & Haug, Alfred A & Michelis, Leo, 1999. "Numerical Distribution Functions of Likelihood Ratio Tests for Cointegration," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 14(5), pages 563-577, Sept.-Oct.
    46. Kim, Soyoung & Roubini, Nouriel, 2000. "Exchange rate anomalies in the industrial countries: A solution with a structural VAR approach," Journal of Monetary Economics, Elsevier, vol. 45(3), pages 561-586, June.
    47. James D. Hamilton, 2011. "Historical Oil Shocks," NBER Working Papers 16790, National Bureau of Economic Research, Inc.
    48. Kim, Soyoung, 2001. "International transmission of U.S. monetary policy shocks: Evidence from VAR's," Journal of Monetary Economics, Elsevier, vol. 48(2), pages 339-372, October.
    49. Hosono, Kaoru, 2006. "The transmission mechanism of monetary policy in Japan: Evidence from banks' balance sheets," Journal of the Japanese and International Economies, Elsevier, vol. 20(3), pages 380-405, September.
    50. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
    51. Marvin Goodfriend & Eswar Prasad, 2009. "A Framework for Independent Monetary Policy in China," Chapters, in: Gill Hammond & Ravi Kanbur & Eswar Prasad (ed.), Monetary Policy Frameworks for Emerging Markets, chapter 8, Edward Elgar Publishing.
    52. Fan, Longzhen & Yu, Yihong & Zhang, Chu, 2011. "An empirical evaluation of China's monetary policies," Journal of Macroeconomics, Elsevier, vol. 33(2), pages 358-371, June.
    53. Wang, Xia & Zheng, Tingguo & Zhu, Yanli, 2014. "Money–output Granger causal dynamics in China," Economic Modelling, Elsevier, vol. 43(C), pages 192-200.
    54. Garratt, Anthony & Koop, Gary & Mise, Emi & Vahey, Shaun P., 2009. "Real-Time Prediction With U.K. Monetary Aggregates in the Presence of Model Uncertainty," Journal of Business & Economic Statistics, American Statistical Association, vol. 27(4), pages 480-491.
    55. Kim, Soyoung, 2001. "Effects of monetary policy shocks on the trade balance in small open European countries," Economics Letters, Elsevier, vol. 71(2), pages 197-203, May.
    56. Ma, Guonan & McCauley, Robert N., 2011. "The evolving renminbi regime and implications for Asian currency stability," Journal of the Japanese and International Economies, Elsevier, vol. 25(1), pages 23-38, March.
    57. Swanson, Norman R., 1998. "Money and output viewed through a rolling window," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 455-474, May.
    58. Kim, Soyoung & Yang, Doo Yong, 2012. "International monetary transmission in East Asia: Floaters, non-floaters, and capital controls," Japan and the World Economy, Elsevier, vol. 24(4), pages 305-316.
    59. Vittorio Grilli & Nouriel Roubini, 1995. "Liquidity and Exchange Rates: Puzzling Evidence from the G-7 Countries," Working Papers 95-17, New York University, Leonard N. Stern School of Business, Department of Economics.
    60. Tomasz Koluk & Aaron Mehrotra, 2009. "The impact of Chinese monetary policy shocks on East and South‐East Asia1," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 17(1), pages 121-145, January.
    61. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
    62. Stock J.H. & Watson M.W., 2002. "Forecasting Using Principal Components From a Large Number of Predictors," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 1167-1179, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kang, Wensheng & Ratti, Ronald A. & Vespignani, Joaquin, 2021. "Financial and nonfinancial global stock market volatility shocks," Economic Modelling, Elsevier, vol. 96(C), pages 128-134.
    2. Lorusso, Marco & Pieroni, Luca, 2018. "Causes and consequences of oil price shocks on the UK economy," Economic Modelling, Elsevier, vol. 72(C), pages 223-236.
    3. Kang, Wensheng & Ratti, Ronald A. & Vespignani, Joaquin L., 2020. "Revising the Impact of Financial and Non-Financial Global Stock Market Volatility Shocks," MPRA Paper 103019, University Library of Munich, Germany.
    4. Clara Inés Pardo Martínez & Alexander Cotte Poveda & Nicolas Ronderos, 2019. "An Analysis for New Institutionality in Science, Technology and Innovation in Colombia Using a Structural Vector Autoregression Model," European Research Studies Journal, European Research Studies Journal, vol. 0(2), pages 218-228.
    5. Alemu Lambamo Hawitibo, 2023. "Explaining macroeconomic fluctuations in Ethiopia: the role of monetary and fiscal policies," Economic Change and Restructuring, Springer, vol. 56(2), pages 1033-1061, April.
    6. Civcir, İrfan & Ertac Varoglu, Dizem, 2019. "International transmission of monetary and global commodity price shocks to Turkey," Journal of Policy Modeling, Elsevier, vol. 41(4), pages 647-665.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Vespignani, Joaquin L. & Ratti, Ronald A., 2013. "International monetary transmission to the Euro area: Evidence from the U.S., Japan and China," MPRA Paper 49153, University Library of Munich, Germany.
    2. Vespignani, Joaquin L. & Ratti, Ronald A., 2013. "Chinese Monetary Expansion and the US Economy," Working Papers 16874, University of Tasmania, Tasmanian School of Business and Economics, revised 05 Aug 2013.
    3. Ratti, Ronald A. & Vespignani, Joaquin L., 2016. "Oil prices and global factor macroeconomic variables," Energy Economics, Elsevier, vol. 59(C), pages 198-212.
    4. Vespignani, Joaquin L., 2015. "International transmission of monetary shocks to the Euro area: Evidence from the U.S., Japan and China," Economic Modelling, Elsevier, vol. 44(C), pages 131-141.
    5. Ratti, Ronald A. & Vespignani, Joaquin L., 2015. "Commodity prices and BRIC and G3 liquidity: A SFAVEC approach," Journal of Banking & Finance, Elsevier, vol. 53(C), pages 18-33.
    6. Ratti, Ronald A. & Vespignani, Joaquin L., 2014. "Oil prices and the economy: A global perspective," MPRA Paper 59407, University Library of Munich, Germany.
    7. Ronald A. Ratti & Joaquin L. Vespignani, 2015. "What drives the global interest rate," Globalization Institute Working Papers 241, Federal Reserve Bank of Dallas.
    8. Kang, Wensheng & Ratti, Ronald A. & Vespignani, Joaquin L., 2014. "Liquidity expansion in China and the U.S. economy," MPRA Paper 59338, University Library of Munich, Germany.
    9. Kang, Wensheng & Ratti, Ronald A. & Vespignani, Joaquin L., 2016. "Chinese liquidity increases and the U.S. economy," Economic Modelling, Elsevier, vol. 52(PB), pages 764-771.
    10. Sousa, Joao Miguel & Zaghini, Andrea, 2007. "Global monetary policy shocks in the G5: A SVAR approach," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 17(5), pages 403-419, December.
    11. Joao Sousa & Andrea Zaghini, 2008. "Monetary policy shocks in the euro area and global liquidity spillovers," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 13(3), pages 205-218.
    12. Anastasios Evgenidis & Costas Siriopoulos, 2015. "What are the International Channels Through Which a US Policy Shock is Transmitted to The World Economies? Evidence from a Time Varying FAVAR," Working Papers 190, Bank of Greece.
    13. Auer, Simone, 2019. "Monetary policy shocks and foreign investment income: Evidence from a large Bayesian VAR," Journal of International Money and Finance, Elsevier, vol. 93(C), pages 142-166.
    14. Checo, Ariadne & Pradel, Salome & Ramirez, Francisco A., 2015. "Measuring the Effects of the ‘Normalization’ of US Monetary Policy on Central America and the Dominican Republic," MPRA Paper 68293, University Library of Munich, Germany.
    15. Civcir, İrfan & Ertac Varoglu, Dizem, 2019. "International transmission of monetary and global commodity price shocks to Turkey," Journal of Policy Modeling, Elsevier, vol. 41(4), pages 647-665.
    16. Kronick, Jeremy, 2014. "Monetary Policy Shocks from the EU and US: Implications for Sub-Saharan Africa," MPRA Paper 59416, University Library of Munich, Germany.
    17. Kim, Soyoung, 2001. "International transmission of U.S. monetary policy shocks: Evidence from VAR's," Journal of Monetary Economics, Elsevier, vol. 48(2), pages 339-372, October.
    18. Rokon Bhuiyan, 2012. "Monetary transmission mechanisms in a small open economy: a Bayesian structural VAR approach," Canadian Journal of Economics, Canadian Economics Association, vol. 45(3), pages 1037-1061, August.
    19. Akbari Dehbaghi, Simin & Arman, Seyed Aziz & Ahangari, Majid, 2020. "The Impact of Domestic and Foreign Monetary Policy on Iran\'s economy: Global Modeling," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 15(2), pages 151-180, April.
    20. Sungurtekin Hallam, Bahar, 2022. "Emerging market responses to external shocks: A cross-country analysis," Economic Modelling, Elsevier, vol. 115(C).

    More about this item

    Keywords

    International Monetary shocks; Japanese economy; Oil/commodity prices; SVEC models;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F0 - International Economics - - General
    • F00 - International Economics - - General - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:48709. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.