Empirical Analysis on the Effects of Japan's Super Quantitative Easing Monetary Policy under the Exchange Rate Transmission Mechanism

Based on Mundell-Fleming-Dornbusch(MFD) model and the New Open Economy Macroeconomics models(NOEM), we built the SVAR model to measure the effect of Japan's super quantitative easing monetary policy under the exchange rate transmission mechanism. The results shows that: the policy's short-term effect is remarkable, and the exchange rate has a significant impact on prices, but not on output, mainly because the depreciation of the yen doesn't obviously improve the trade balance; with the amount of Japan base money becomes bigger and bigger, the growth of broad money's supply slows down, and monetary liquidity may be strand in the financial system and breed asset bubble, then the effects of policy will get worse; as Japan's quantitative easing monetary policy getting more loose and the Federal Reserve withdrawing the quantitative easing policy, China should not only absorb the lessons of Japan's loose monetary policy practical experiences, but also treat its negative impact carefully and respond as soon as possible.