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Monetary Policy and the Term Structure of Interest Rates in Japan

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  • Braun, R. Anton
  • Shioji, Etsuro

Abstract

This paper uses Japanese data to investigate the relationship between monetary policy and the yield curve. We find that the response of the yield curve depends in an important way on the maintained hypothesis about how monetary policy affects the economy. Under the liquidity effect maintained hypothesis monetary policy only has transient effects on the yield curve. Under the costly price adjustment maintained hypothesis, however, monetary policy has large and persistent effects on yields of all maturities.

Suggested Citation

  • 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.
    • Handle: RePEc:mcb:jmoncb:v:38:y:2006:i:1:p:141-162
    DOI: 10.1353/mcb.2006.0012
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    References listed on IDEAS

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    1. Richard Clarida & Jordi Galí & Mark Gertler, 2000. "Monetary Policy Rules and Macroeconomic Stability: Evidence and Some Theory," The Quarterly Journal of Economics, Oxford University Press, vol. 115(1), pages 147-180.
    2. S. Rao Aiyagari & R. Anton Braun & Zvi Eckstein, 1998. "Transaction Services, Inflation, and Welfare," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1274-1301, December.
    3. Ben S. Bernanke & Ilian Mihov, 1998. "Measuring Monetary Policy," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 869-902.
    4. Etsuro Shioji, 1997. "Spanish monetary policy: A structural VAR analysis," Economics Working Papers 215, Department of Economics and Business, Universitat Pompeu Fabra.
    5. Miyao, Ryuzo, 2002. "The Effects of Monetary Policy in Japan," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 376-392, May.
    6. Ang, Andrew & Piazzesi, Monika, 2003. "A no-arbitrage vector autoregression of term structure dynamics with macroeconomic and latent variables," Journal of Monetary Economics, Elsevier, vol. 50(4), pages 745-787, May.
    7. Charles M. Kahn & William Roberds, 2002. "Payments settlement under limited enforcement: Private versus public systems," FRB Atlanta Working Paper 2002-33, Federal Reserve Bank of Atlanta.
    8. R. Anton Braun & Etsuro Shioji, 2003. "Monetary Policy and Economic Activity in Japan and the United States," CIRJE F-Series CIRJE-F-251, CIRJE, Faculty of Economics, University of Tokyo.
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    Cited by:

    1. Kensuke Miyazawa & Kengo Nutahara, 2013. "Dynamic Effects of Fiscal Policy in Japan: Evidence from a Structural VAR with Sign Restrictions," CIGS Working Paper Series 13-006E, The Canon Institute for Global Studies.
    2. Masahiko Shibamoto, 2016. "Empirical Assessment of the Impact of Monetary Policy Communication on the Financial Market," Discussion Paper Series DP2016-19, Research Institute for Economics & Business Administration, Kobe University.
    3. Masahiko Shibamoto, 2016. "Source of Underestimation of the Monetary Policy Effect: Re-Examination of the Policy Effectiveness in Japan's 1990s," Manchester School, University of Manchester, vol. 84(6), pages 795-810, December.
    4. Forgha Godfrey NJIMANTED & Daniel AKUME & Emmanuel Mbella MUKETE, 2016. "The Impact of Key Monetary Variables on the Economic Growth of the CEMAC Zone," Expert Journal of Economics, Sprint Investify, vol. 4(2), pages 54-67.
    5. Shin-ichi Fukuda, 2010. "The Rise of China and the Sustained Recovery of Japan," Chapters, in: Takatoshi Ito & Chin Hee Hahn (ed.),The Rise of China and Structural Changes in Korea and Asia, chapter 9, Edward Elgar Publishing.
    6. Filippo COSSETTI & Francesco GUIDI, 2009. "ECB Monetary Policy and Term Structure of Interest Rates in the Euro Area: an Empirical Analysis," Working Papers 334, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
    7. Shigeru Iwata, 2010. "Monetary Policy and the Term Structure of Interest Rates When Short-Term Rates Are Close to Zero," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 28, pages 59-78, November.
    8. Jonathan A Batten & Peter G Szilagyi, 2012. "Comments on Qianying Chen, Andrew Filardo, Dong He and Feng Zhu's paper "The impact of central bank balance sheet policies on the emerging economies"," BIS Papers chapters, in: Bank for International Settlements (ed.),Are central bank balance sheets in Asia too large?, volume 66, pages 265-284, Bank for International Settlements.
    9. Masahiko Shibamoto & Wataru Takahashi & Takashi Kamihigashi, 2020. "Japan's Monetary Policy: A Literature Review and Empirical Assessment," Discussion Paper Series DP2020-15, Research Institute for Economics & Business Administration, Kobe University, revised Jul 2020.

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