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News implied volatility and aggregate economic activity: evidence from the Japanese government bond market

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  • Keiichi Goshima
  • Hiroshi Ishijima
  • Mototsugu Shintani

Abstract

Because options on 10-year Japanese government bond (JGB) futures are relatively new in the market, their implied volatility, JGB-VIX, is not available before 2007. For the period when JGB-VIX is available, we conduct supervised learning by using the daily newspaper articles as input and JGB-VIX as output. We then construct a new JGB market uncertainty measure, which we called JGB-NU, based on the predicted values of JGB-VIX from the estimated model and contents of the newspaper articles from 1981 to 2021. In the VAR analysis with JGB-NU, we confirm that JGB market uncertainty shocks have a negative impact on real economic activities in Japan.

Suggested Citation

  • Keiichi Goshima & Hiroshi Ishijima & Mototsugu Shintani, 2024. "News implied volatility and aggregate economic activity: evidence from the Japanese government bond market," Applied Economics Letters, Taylor & Francis Journals, vol. 31(6), pages 568-573, March.
    • Handle: RePEc:taf:apeclt:v:31:y:2024:i:6:p:568-573
    DOI: 10.1080/13504851.2022.2140751
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