Study On The Bank Of Japan's Unconventional Monetary Policy

With the world's major developed countries' central bank implementing unconventional monetary policy after the financial crisis in 2007,a study on the unconventional monetary policy become the hot topic of finance and monetary policy research.Unconventional monetary policy is the countermeasures using by the central bank when conventional monetary policy is failed on the transmission mechanism and economic depression to provide funding and restore monetary policy transmission.Unconventional monetary policy is different from conventional monetary policy on the implementation of the background,policy tools and transmission mechanism which is also an important successful application of the new theory of monetary policy in recent years.The practice of unconventional monetary policy in various countries shows that this series of policies stabilize the financial markets and avoid the deep-seated crisis of the real economy.This paper chooses Asia's largest developed country,Japan,as the research object to study the effect of unconventional monetary policy implementated by Bank of Japan,which is the first central bank in the world have done this,and the impact on China.This paper starts from the theoretical basis of the unconventional monetary policy and the implementation of the two time unconventional monetary policies of the Bank of Japan,that is combinng the theory and the reality to comprehensively and profoundly understand the connotation of the unconventional monetary policy,and then using the empirical model which conforms to the changes of the Japanese economic structure to test the effect of Bank of Japan's unconventional monetary policy,as well as establishes DSGE theoretical model to discuss the existence of the portfolio banlance channel of the unconventional monetary policy's transmission mechanism.Based on these,the paper put forward the policy suggestion and theoretical reference for the monetary policy operation and theoretical research in China.On the aspect of reality analysis,this paper shows that the Bank of Japan is the ideal object of studing unconventional monetary policy.Unconventional monetary policy comes from the study of the Great Depression,Japan's unconventional monetary policy practice should also reslove the long-term economic stagnation.The difference of Japan's two time unconventional monetary policy shows the characteristic of monetary policy and transmission mechanism in unconventional monetary policy.The prograss made by Bank of Japan during this period is worth learning from our central bank.On the aspect of empirical analysis,this paper finds that the Bank of Japan's zero interest rate policy does not play a role through the promised effect after the financial crisis,especially after the implementation of the qualitative and quantitative monetary policy in 2013,which is proved by the fact that the interest rate can not change the expected change.The balance sheet policy which set up an asset purchase program has played a role in pulling economic growth and rising prices.The unconventionalmonetary policy also has a strong spillover effect on China from international portfolio balance channel.The expansion of the Bank of Japan's balance sheet will bring about a decrease in our bond yields,the higher the price level and the impact of the decline in output levels.On the aspect of theoretical analysis,establish the new Keynesian DSGE model which is incorporates the banking sector and financial friction hypothesis and calibrate parameter based on the reality of Japan,the model simulation result shows that the purchase of long-term bonds by Bank of Japan can stimulate consumption and output growth as well as rise in the price level.The impact of the unconventional monetary policy impact is smaller relative to the conventional interest rate rules,which can reduce the volatility of output and inflation due to changes in monetary policy.The decline in short-term bond prices and the rise in long-term bond prices shows involvement of bank intermediaries has changed its own portfolio,proving the existence of the reorganization mechanism of the portfolio.The results that the effects of Bank of Japan's zero interest rate policy have weakened,the existence of the balance sheet policy transmission mechanism and the negative spillover effect on China after the financial crisis bright the enlightenment to our monetary policy.Only relied on the conventional easy monetary policy to solve the economic and the financial problems when financial crisis happened is not enough,monetary policy operation must be innovative and advanced.The unconventional monetary policy should not only solve the recession as the means of transition,it may also indicate the future direction of monetary policy.The boundaries of conventional and unconventional policies are not important,we should deal flexibly with different monetary policies based on economic conditions and the causes of the crisis.The new monetary policy instruments that emerged in unconventional monetary policy address the problem of poor policy transmission when many conventional monetary policies are ineffective and the possibility that these policy instruments are retained as routinely after the gradual withdrawal of unconventional policies,our central bank should learning and drawing on the creative process of the developed countries policy tools,do with the forward-looking monetary policy research.