This paper studies the role of the yen/dollar exchange rate in the Bank of Japan?s monetary policy reaction function. In contrast to prior estimations of reaction functions based on the Taylor-rule, we allow for regime shifts by estimating rolling coefficients from January 1974 to March 1999....

This paper studies the role of the yen/dollar exchange rate in the Bank of Japan?s monetary policy reaction function. In contrast to prior estimations of reaction functions based on the Taylor-rule, we allow for regime shifts by estimating rolling coefficients from January 1974 to March 1999....