Cointegrating Analysis of Monetary Transmission Mechanism

Abstract

In this paper, the mechanism is investigated by which monetary policy is transmitted to the real economy in Japan. The stationarity of variables is checked by unit root test and the cointegration property among nonstationary variables is tested by Johansen's method. The system is constructed in a form of VECM(Vector Error Correction Model) and finally impulse responses of real GDP are calculated under several situations where the shock of call rate influences to real GDP with two channels of money and credit.