Macroeconomic Effects of Monetary Policy in Japan an Analysis Using Interest Rate Futures Surprises

This paper estimates the effects of monetary policy on real economic activity and prices in Japan, during the last three decades when the effective lower bound (ELB) on interest rates was occasionally binding. To identify monetary policy shocks, we use the monetary policy surprises from the interest rate futures market as the external instrument, as in the analysis of Gertler and Karadi (2015) for the US. We find that monetary policy has been effective in Japan with its long-run effects becoming stronger when the ELB was binding