Monetary Policy and the Term Structure of Interest Rates in Japan
AbstractThis paper uses Japanese data to investigate the relationship between monetary policy and the yield curve. We compare and contrast the role of monetary policy under two perspectives. Under the liquidity effect maintained hypothesis monetary policy is an ineffective tool in altering long-term bond yields and doesnft account for much of the long-term variation in bonds of any maturity. Under the sticky price maintained hypothesis, however, monetary policy has large and persistent effects on the yield curve producing large hump-shaped responses in yields of all maturities. Moreover, under this hypothesis shocks to monetary policy and other macroeconomic variables are important sources of variation in long-term yields jointly accounting for 50% of the long-run variance of the 5-year yield.
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Bibliographic InfoPaper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number CIRJE-F-252.
Length: 41 pages
Date of creation: Dec 2003
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Other versions of this item:
- Braun, R. Anton & Shioji, Etsuro, 2006. "Monetary Policy and the Term Structure of Interest Rates in Japan," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(1), pages 141-162, February.
- NEP-ALL-2003-12-07 (All new papers)
- NEP-CBA-2003-12-07 (Central Banking)
- NEP-MAC-2003-12-07 (Macroeconomics)
- NEP-MON-2003-12-07 (Monetary Economics)
- NEP-SEA-2003-12-07 (South East Asia)
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