The impact on financial markets is measured as the change of
returns on sovereign yields or asset prices during the event
windows. To assess whether monetary easing measures have
a positive impact, we measure the cumulative change of
returns over the events against the standard errors relative to
returns of typical trading days (daily frequency excluding the
event dates) from January 2005 to mid-2011.3
Specifically,(Fund 2011)
Where i denotes a particular event and I denotes the total
number of events in the set (e.g., five events of new monetary
easing measures). Another set of events is the actual
purchases by the BOJ under its asset purchase program,
which accounts for more than 50 events since its introduction.
refers to the change of returns on particular event of an asset
(e.g., 10-year sovereign bond) when the event occurs at time
t, and the returns of various asset classes are calculated
similarly. In the case of weekly window, the expression will
be t+4 versus t-1. The standard error σ is calculated based on
daily volatility of typical trading days from January 2005 to
June 2011. The cumulative change of returns is compared to
the Z-statistics for statistical significance at 5 percent level.4
Overall, the BoJ’s monetary easing measures have had a
positive impact on financial markets. The impact is
broad-based and extends beyond the assets that the BoJ
purchases.
• Government securities. Sovereign yields across all
maturities declined in three out of the five events at
the 5 percent significance level. The 10-year JGB
yield fell by a cumulative 24 basis points while the
2-year JGB yield fell by 14 basis points compared to
a 0.1 basis point of change in a typical trading day
(Table 3a). The initial fall in sovereign yields appears
to persist and reinforces the decline in the following
week (Table 3b). Declines of shorter maturity yields
were not significant at the event of the introduction of
CME, in part because those...