Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
965295 | Journal of the Japanese and International Economies | 2013 | 19 Pages |
Abstract
I construct a no-arbitrage term structure model with endogenous regime shifts and apply it to Japanese government bond (JGB) yields. This model subjects the short-term interest rate to monetary regime shifts, specifically a zero interest rate policy (ZIRP) and normal regimes, which depend on macroeconomic variables. The estimates show that under the ZIRP regime, the effect of deflation (inflation) on lowering (raising) bond yields amplifies on the long end of yield curves, compared with a case with positive interest rates under the normal regime. On the other hand, output gaps' ability to raise bond yields weakens for all maturities.
Keywords
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Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Junko Koeda,