National University of Singapore
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Institutional Affiliation: National University of Singapore
NBER Working Papers and Publications
|February 2019||Bank of Japan Equity Purchases: The Final Frontier in Extreme Quantitative Easing|
with Randall Morck, Yupana Wiwattanakantang: w25525
Between 2011 and March 2018, the Bank of Japan (BOJ) purchased equity worth approximately 4% of Japan’s GDP. We find the stock return elasticity with respect to BOJ purchases is around 1.6 on the day of the purchase. Over one quarter, purchases worth 1% of total assets correspond to a one-percentage-point increase in returns and a 0.27-percentage-point increase in total assets. BOJ purchases also predict equity but not debt issuances. However, the increases in total assets largely reflect increased cash and short-term investments. This unconventional monetary stimulus thus does not appear to transmit into tangible capital investment.