Fiscal cost to exit quantitative easing: the case of Japan

Japan and the World Economy, 2017, vol. 42, issue C, 1-11

Abstract: This paper simulates the cash flows and balance sheet of the Bank of Japan (BoJ) before and after the end of Quantitative and Qualitative Monetary Easing (QQE) under various scenarios. The simulations show that the BoJ will record significant accounting losses after the end of QQE, because the yields on Japanese government bonds (JGBs) acquired during QQE will be lower than the interest rate on excess reserves after the end of QQE. These losses are fiscal costs for the consolidated Japanese government, as they correspond to increased interest expenses to the public. The extent of the BoJ's accounting losses depends crucially on the duration of QQE and the interest-rate elasticity of banknote demand.

Keywords: E52; E58; E61; Quantitative and Qualitative Monetary Easing; Quantitative easing; Fiscal cost; Central bank; Solvency (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0922142516300391
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Fiscal Cost to Exit Quantitative Easing: The Case of Japan (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:42:y:2017:i:c:p:1-11

DOI: 10.1016/j.japwor.2017.02.003

Access Statistics for this article

Japan and the World Economy is currently edited by Robert Dekle and Yasushi Hamao

More articles in Japan and the World Economy from Elsevier
Bibliographic data for series maintained by Catherine Liu ().