MONETARY POLICY SHOCKS AND THE AGGREGATE ECONOMY:A SVAR ANALYSIS OF JAPAN

Janiarti Siola Marthen, Prof. Chun-Hung Kuo, Ph.D

2013 | Tesis | S2 Magister Ek.Pembangunan

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This study will analyze the impact of monetary policy shocks to the economy of Japan. For further analysis, I will utilize structural VAR and forecast the impact of monetary policy shock by using impulse response function. This study will use money supply or M2 and interest rate as the monetary instruments. The empirical results of this study show that the positive shock in M2 will cause the aggregate economy increase gradually. The effect of shock in M2 to real output, real consumption, real investment, and inflation rate will reach its peak at the certain period and afterwards the effect will die out gradually. In this case, the economy of Japan experiences an expansionary monetary policy shock. Another finding of this study is the positive shock in interest rate will cause declining in the aggregate economy. At the particular period, real output, real consumption, real investment, and inflation rate will experience the biggest shock as the response of shock in interest rate. Then, the effect will disappear gradually. In this case, the economy of Japan encounters a contractionary monetary policy shock.

Kata Kunci : Monetary policy shock, Structural VAR, Impulse Response Function, Japan Economy.