Kuroda - Özatay

Question 1

Heterodox (unconventional) Monetary policy

Answer 1

• Quantitative easing (credit expansion)
• Forward guidance
• FED, BoJ, BoE first applied

Question 2

90’s to 97 crisis for japan

Answer 2

• strong industrial structure, weak financial str.
• inc non-performing assets
• declining prices
• appreciation of yen
• deteriorating foreign trade
• 97 crisis: collapse of fin inst.
• summer 98: inf rate below 0: drop dramatically policy rate from %6 to %0.25

Question 3

Krugman on japanese eco

Answer 3

• liquidity trap
• increase money supply
• increase inf exp
• make real interest rates sufficiently negative

Question 4

BoJ - 99

Answer 4

• dot-com crisis
• feb: ZIRP zero int rate pol
• apr: Qualitative forward guidance

Question 5

Forward Guidance Types

Answer 5

1. Open ended guidance (eg. no increase for a long time)
2. Calender based guidance (announce the date of the cahnge in pol rate)
3. Circumstantional guidance (BoE: keep unchanged until unemp below %7)

Question 6

BoJ - 2000-2001

Answer 6

• BoJ lifted zirp after recovery
• but dot-com effected them
• QE and Forward guidance
• QE flatten the yield curve better than zirp (to rise demand)

Question 7

BoJ - 2004-2013

Answer 7

-04: QE, 5 trillion to 30
-06: QE ended, raised rate to 0.25, CPI increased
(08 global crisis-CPI negative)
-10: Comprehensive monetary easing - purchase broad range of assets
-12: introduced “price stability goal”
-13: both qualitative and quantitative monetary easing (main difference: gave more detail to influence private sector expectations)

Question 8

Bernanke&Reinhert QE

Answer 8

1. Expand the size of CB’s balance sheet
2. Change the composition of CB’s balance sheet
3. Shape the interest rate expectations

Question 9

Difference between conv and unconv QE

Answer 9

purchases of the CB

Question 10

FED 2009-2015

Answer 10

08 - cuts its short term interest rate (almost zero)
09 - declared “near zero for an extended period”
11 - mid 2013 for extended period
12 - late 2014
12 - mid 2015
dec12 - “after a considerable time”
13 - “as long as the unemp above %6.5”
14 - %6.5 very quickly, revised the treshold
dec14 - “considerable time=6 months”
mid15 - stopped buying bonds

Question 11

Result of liquidity for developing countries

Answer 11

1. Appreciation of the currency (increasing current account - fragileness)
2. Foreign demand decrease (again CA deficit)
3. Low cost liquidity leading to increasing imports (again CA deficit)

Question 12

To control expectations (price stability)

Answer 12

credit policy - macro, prudential tools

Question 13

To control credit growth (price stability)

Answer 13

interest rate policy - weekly repo

Question 14

To control exchange rate (fin stability)

Answer 14

liquidity policy - interest rate corridor

Question 15

unconventional means…

Answer 15

CB enters the market as an important actor