Chinn and Dooley (1997) estimate an interest rate reaction function, using as targets the
forecasts of inflation and output gap obtained from a structural VAR of the main economic
aggregates that are related to monetary policy, as suggested by Clarida and Gertler (1996).
Their findings indicate the relevance of inflation and output stabilization to the BOJ policy.
They observe that the inclusion of real exchange rate deviations is not statistically
significant to explain the behavior of the interest rate.