NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Bank of Japan Equity Purchases: The (Non-)Effects of Extreme Quantitative Easing

Ben Charoenwong, Randall Morck, Yupana Wiwattanakantang

NBER Working Paper No. 25525
Issued in February 2019, Revised in August 2020
NBER Program(s):Corporate Finance

From January 2011 through March 2018, the Bank of Japan purchased equity index ETFs worth about 3.5% of GDP. Identification of the effect of central bank ETF purchases on stock valuations and corporate responses is via differently-weighted and changing stock indices. BOJ purchases lift valuations, increase share issuances, and increase total assets. On average, the latter increase is due to cash and short-term securities rather than capital investment. However, firms with worse corporate governance do increase capital investment. These findings suggest central bank equity purchases are a problematic tool for stimulating economic growth through high broad-based private-sector corporate investment.

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Document Object Identifier (DOI): 10.3386/w25525

 
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