Y. Morita and S. Miyagawa (Japan)
time series analysis, monetary transmission, cointegration
Monetary transmission mechanism in Japan is investigated. The system contains nonstationary variables (gdp, money supply and bank loan) and stationary interest rate (denoted by r(t)). Stationary r(t) is excluded in cointegration analysis and the resultant VEC (vector error correction) model. Introducing a cumulative interest rate R(t)(≡ ∑t1r(i)), unit root property of R(t) is shown around quadratic trend, where the critical value for hypothesis test is calculated by Monte Carlo experiments. Nonstationary property of R(t) requires cointegration analysis among R(t) and the other variables. The VEC model driven by r(t) can be derived strictly in Johansen’s sense and gives us comparative discussions of money and credit views from impulse responses and Granger causality. The importance of money channel is concluded rather than credit one.
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