Japanese quantitative easing : the effects and constraints of anti deflationary monetary expansions

Abstract

The aim of this dissertation is to empirically analyse the effects of the Bank of Japan's anti-deflationary Quantitative Easing Policy carried out between March 2001 and April 2006. In doing so, this study also reviews the zero bound to interest rates, defined as the primary constraint to the effectiveness of conventional monetary policy at the interest rate floor. The results of the economic models contained in this study confirm the economic significance of a sustained increase in liquidity in fostering a return to inflationary pressures. Moreover, the findings of the study confirm that effective anti deflationary policies may not necessarily entail extreme measures on the part of a central bank; on the other hand, credibility coupled with a resolved commitment may very well be enough to provide for positive macroeconomic repercussions.