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Endogenous Monetary Policy Shifts and the Term Structure: Evidence from Japanese Government Bond Yields

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  • Junko Koeda

    (The University of Tokyo)

Abstract

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.

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File URL: http://www.carf.e.u-tokyo.ac.jp/pdf/workingpaper/fseries/F303.pdf
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Bibliographic Info

Paper provided by Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo in its series CARF F-Series with number CARF-F-303.

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Length: 39 pages
Date of creation: Dec 2012
Date of revision: Apr 2013
Handle: RePEc:cfi:fseres:cf303

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Cited by:
  1. Jens H.E. Christensen, 2013. "A regime-switching model of the yield curve at the zero bound," Working Paper Series 2013-34, Federal Reserve Bank of San Francisco.

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