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Discriminatory versus uniform auctions:Evidence from JGB market

Author

Listed:
  • 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)

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).

Suggested Citation

  • Takahiro Hattori & Shogo Takahashi, 2021. "Discriminatory versus uniform auctions:Evidence from JGB market," Discussion papers ron344, Policy Research Institute, Ministry of Finance Japan.
    • Handle: RePEc:mof:wpaper:ron344
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    File URL: https://www.mof.go.jp/pri/research/discussion_paper/ron344.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Discriminatory auction; Uniform auction; Markup; When-issued markets; Japanese government bond; government costs;
    All these keywords.

    JEL classification:

    • C57 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Econometrics of Games and Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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