Quantitative Impulse Response Approach to Monetary Transmission Mechanism

Y. Morita and S. Miyagawa (Japan)


time series analysis, monetary transmission, impulse re sponse, unit root


Monetary transmission in Japan is investigated. The VEC model is constructed for I(1) variables (gdp, money supply, bank loans) combined with stationary (or nonstationary) interest rate r(t). Impulse responses of level variables are obtained by accumulating growth rates responses and exhibit convergence property to non-zero asymptotic states which are theoretically obtained in cointegrated and/or non-cointegrated systems. In [1975,1997] and [1985,1997], money and credit views are comparatively discussed from algebraic relation among asymptotic states of (gdp, money, loans). An inequality is derived which distinguishes the path (money loans gdp) from (money gdp) not through loans. It can be seen that the importance of money channel in [1975,1997] changed to that of the credit one in [1985,1997].

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