The Term Structure of Interest Rates and Monetary Policy during a Zero Interest Rate Period

Jun Nagayasu

Monetary and Economic Studies, 2004, vol. 22, issue 2, 19-43

Abstract: This paper empirically evaluates the validity of the term structure of interest rates in a low interest rate environment using high-frequency Japanese data. Allowing for the time-varying term premium, we obtain evidence that when interest rates are low and the short end of the term structure is studied, there is no evidence to support the term- structure relationship. This poor performance is attributed to little information in the interest rate spread that can be used to predict future economic activity and/or to the absence of the persistent term premium. In contrast, some evidence for the term-structure relationship is found when the long end of the term-structure data is considered during a relatively high interest rate period.

JEL-codes: E43 E52 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (6)

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Working Paper: The Term Structure of Interest Rates and Monetary Policy During a Zero-Interest-Rate Period (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:ime:imemes:v:22:y:2004:i:2:p:19-43

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