Abstract
Monetary transmission in Japan is investigated. The VEC model is constructed for I(1) variables (gdp, money supply, bank loans) combined with stationary (or nonstationary) interest rate r(t). Impulse responses of level variables to r(t)-shock in stationary r(t) (or Δr(t)-shock in nonstationary r(t)) are obtained by accumulating growth rates (i.e., differenced variables) responses and exhibit convergence property to non-zero asymptotic states which are theoretically obtained in cointegrated and/or non-cointegrated systems. In [1975,1997] and [1985,1997], money and credit views are comparatively discussed from algebraic relation among asymptotic states of (gdp, money, loans). It can be seen that the importance of money channel in [1975,1997] changed to that of the credit one in [1985,1997], which suggests that the credit crunch of lending market in 1990's has a serious effect on the Japanese economy.
