This is not an academic paper. I can use freely my estimation tools.
My sense is that if the monetary policy run by the market (NGDP futures), stocks volatility will be reduced roughly 50%.
(Proper permanent credible framework)
TOPIX. Refrain of the valleys and mountains are made by the monetary policies. (Including with the effect of the political dynamics)
In 1998, Obuchi-san raised turnips. Abe-san followed that this year. http://sankei.jp.msn.com/politics/news/130324/plc13032423380012-n1.htm
(This is a Japanese traditional management tool of expectation for raising stock prices. )
GPIF or the other pension fund’s optimized portfolio is based on the assumption (from historical data) that TOPIX “risk” is roughly 22%. Calm period is 10 to 13%.
If cap-weighted topix risk is 12% permanently, I can use more money to buy more risky assets. Many small caps are doing very interesting project for the economic growth. Some small caps will be financed by more 20 to 40 % cheap (easy) capitals.
Those effects are permanent. In addition, voters can select the parties without monetary policy preference.
By the way, at deflation, Japanese trend RGDP growth was 1%. In reflation, or under the inflation target, RGDP growth 2% is easily achievable. In 1980 to1990, average RGDP growth was 4.5%.
I was in a Japanese maker of R&D section. I saw a lot of factories of Japan. I thought some cumulative long-run supply-side deteriorates were going from 1970s. Poor monetary policy have distorted growth from very long ago.
I think the Tankan Charts (page.13) are useful for AD-AS analysis of Japanese economy.)
If monetary policy were run by the market, they could more invest capitals (efficiently) to achieve long-run growth.
Under the monetary policy which runs by the market, Japanese trend growth of RGDP will be 4 to 6%.
Stock prices will soar 30% to 50% at the first three months.