A note on modelling yield curve control: A target-zone approach

Cho-Hoi Hui, Andrew Wong and Chi-Fai Lo

Finance Research Letters, 2022, vol. 49, issue C

Abstract: This note uses a target-zone model to study the bond yield movements under yield curve control. The bond yield is assumed to be quasi-bounded in a band, but can breach a cap under a restricted condition of its dynamics. The empirical results using the 10-year Japanese Government Bonds suggest that this model can describe the yield dynamics under yield curve control. Co-integration results show spill-over effects from US Treasury yields to the Japanese Government Bond yield dynamics. While the bond yield was bounded below the caps, the conditions for breaching the caps were met in October 2018 and March 2021.

Keywords: Target zone; Yield curve control; Quasi-bounded process (search for similar items in EconPapers)
JEL-codes: F31 G01 G13 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:49:y:2022:i:c:s1544612322003063

DOI: 10.1016/j.frl.2022.103076

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