Endogenous Monetary Policy Shifts and the Term Structure: Evidence from Japanese Government Bond Yields
No CARF-F-303, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo
I construct a no-arbitrage term structure model with endogenous regime shifts and apply it to Japanese government bond (JGB) yields. This application subjects the short-term interest rate to monetary regime shifts, such as a zero interest rate policy (ZIRP) and normal regimes, which depend on macroeconomic variables. The estimated results show that under a ZIRP, the deflationary effect on bond yields increases on the longer end of yield curves; on the other hand, the effect of output gaps on raising bond yields weakens for all maturities.
Pages: 39 pages
Date: 2012-12, Revised 2013-04
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Journal Article: Endogenous monetary policy shifts and the term structure: Evidence from Japanese government bond yields (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:cfi:fseres:cf303
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