J-liquidity measure: The term structure of the liquidity premium in Japan

Takahiro Hattori

Japan and the World Economy, 2019, vol. 49, issue C, 61-72

Abstract: We interpret the yield spread between Japanese government-guaranteed bonds and government bonds as market liquidity, which we refer to as the J-liquidity measure. Our model-free approach not only provides the term structure of the liquidity premium, but also captures the impact of illiquidity events and the illiquidity condition of the Japanese fixed-income market. We empirically show that the long-term factor of the liquidity premium curve is driven by the volatility of the short-term rate. The liquidity measure is provided publicly for future applications.

Keywords: Bond liquidity; Liquidity risk; Term structure of the liquidity premium (search for similar items in EconPapers)
JEL-codes: G12 G13 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:49:y:2019:i:c:p:61-72

DOI: 10.1016/j.japwor.2018.08.005

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