The Choice of Operational Target under the Marketization of Interest Rates:Experience and Enlightenment from Japan
In the practice of monetary policy,central banks in developed economies have continuously op-timized their operational targets,providing rich experience and insights for emerging market economies,including China,in establishing operational targets under interest rate regulation.This paper takes the op-erational target of monetary policy ts as a point of departureto summarize the typical facts and theoretical transmission mechanisms of Japan's monetary policy practice since the completion of interest rate marketi-zation reform.It employs the TVP-SV-VAR model to examine the regulatory effects of Japan's monetary policy in different periods and the interlinkage between the operational targets of monetary policy and in-termediate variables.The paper also summarizes the lessons and insights from Japan's flexible adjustment of its monetary policy operational targets.Drawing from the practical experiences of the Bank of Japan,the control of the yield curve represents is an unconventional transitional institutional arrangement.Under the conventional interest rate regulation,the overnight interest rate in the money market should be adopted as the operational target.
interest rate marketizationoperational target of monetary policyovernight ratemedium and long-term interest rate regulationJapan
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