Estimating Term Premia at the Zero Bound: An Analysis of Japanese, US, and UK Yields

Hibiki Ichiue () and Yoichi Ueno
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Yoichi Ueno: Bank of Japan

No 13-E-8, Bank of Japan Working Paper Series from Bank of Japan

Abstract: This paper estimates an affine term structure model (ATSM) and a shadow rate model (SRM) using Japanese, US, and UK data until March 2013. These models produce very different results, which are attributable to the ATSM's neglect of the zero lower bound (ZLB). The 10-year term premium estimated by the ATSM occasionally deviates from that estimated by the SRM by around 2 percentage points, and the deviation has recently widened in the US and the UK. The ATSM consistently overestimates the long-run level of the short rate, which appears to contribute to the tendency to underestimate the term premium.

Keywords: Affine term structure model; Shadow rate model; Zero lower bound; Term premium; Monetary policy (search for similar items in EconPapers)
JEL-codes: E43 E52 G12 (search for similar items in EconPapers)
Date: 2013-05-08
New Economics Papers: this item is included in nep-mac and nep-mon
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Citations: View citations in EconPapers (49)

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