Discriminatory versus uniform auctions:Evidence from JGB market

Takahiro Hattori and Shogo Takahashi
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Takahiro Hattori: Corresponding author. Project Assistant Professor, University of Tokyo and Visiting Scholar, Policy Research Institute, Ministry of Finance, Japan
Shogo Takahashi: Visiting Scholar, Policy Research Institute, Ministry of Finance, Japan

Discussion papers from Policy Research Institute, Ministry of Finance Japan

Abstract: In 2007, the Japanese government changed the format of auctions for 30-year Japanese government bonds (JGB) from uniform to discriminatory. We examine data before and after this change to assess whether this has lowered the borrowing costs of the Japanese government, in the largest government bond market in the world. As Ausubel et al. (2014) described, the general revenue ranking of uniform and discriminatory auctions is an empirical question. Our empirical result shows that this policy change lowered borrowing costs. We also show that a discriminatory auction lowers the borrowing costs when the value of the bidders to JGB tends to be symmetric, which is consistent with the prediction of Ausubel et al. (2014).

Keywords: Discriminatory auction; Uniform auction; Markup; When-issued markets; Japanese government bond; government costs (search for similar items in EconPapers)
JEL-codes: C57 D82 G18 G28 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2021-11
New Economics Papers: this item is included in nep-des
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https://www.mof.go.jp/pri/research/discussion_paper/ron344.pdf First version, 2016 (application/pdf)

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