IDEAS home Printed from https://ideas.repec.org/p/aim/wpaimx/1912.html
   My bibliography  Save this paper

Potential Growth and Natural Yield Curve in Japan

Author

Abstract

We estimate the yield curve gap in Japan and examine whether it has contributed to the sustained low growth and low inflation rates observed since the beginning 2000s. We use a semi-structural empirical model that generalizes Laubach and Williams’ approach, considering the entire range of maturities of the interest rates and dealing with the issue of mixed frequency sampling. We consider global factors exerting downward pressures on inflation and examine how the neutral yield curve has affected the snowball effect in the dynamics of the Japanese public debt ratio.

Suggested Citation

  • Gilles Dufrénot & Meryem Rhouzlane & Etienne Vaccaro-Grange, 2019. "Potential Growth and Natural Yield Curve in Japan," AMSE Working Papers 1912, Aix-Marseille School of Economics, France.
  • Handle: RePEc:aim:wpaimx:1912
    as

    Download full text from publisher

    File URL: https://www.amse-aixmarseille.fr/sites/default/files/working_papers/wp_2019_-_nr_12.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Raphael Auer & Claudio Borio & Andrew Filardo, 2017. "The globalisation of inflation: the growing importance of global value chains," BIS Working Papers 602, Bank for International Settlements.
    2. Gauti B. Eggertsson & Neil R. Mehrotra & Lawrence H. Summers, 2016. "Secular Stagnation in the Open Economy," American Economic Review, American Economic Association, vol. 106(5), pages 503-507, May.
    3. Eric Ghysels & Arthur Sinko & Rossen Valkanov, 2007. "MIDAS Regressions: Further Results and New Directions," Econometric Reviews, Taylor & Francis Journals, vol. 26(1), pages 53-90.
    4. Gabriele Fiorentini & Alessandro Galesi & Gabriel Pérez-Quirós & Enrique Sentana, 2018. "The rise and fall of the natural interest rate," Working Papers 1822, Banco de España;Working Papers Homepage.
    5. Michał Brzoza-Brzezina & Jacek Kotłowski, 2014. "Measuring the natural yield curve," Applied Economics, Taylor & Francis Journals, vol. 46(17), pages 2052-2065, June.
    6. Cette, Gilbert & Fernald, John & Mojon, Benoît, 2016. "The pre-Great Recession slowdown in productivity," European Economic Review, Elsevier, vol. 88(C), pages 3-20.
    7. Bernard, Henri & Gerlach, Stefan, 1998. "Does the Term Structure Predict Recessions? The International Evidence," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 3(3), pages 195-215, July.
    8. Olivier Blanchard, 2018. "Should We Reject the Natural Rate Hypothesis?," Journal of Economic Perspectives, American Economic Association, vol. 32(1), pages 97-120, Winter.
    9. Frank Schorfheide & Dongho Song, 2015. "Real-Time Forecasting With a Mixed-Frequency VAR," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 33(3), pages 366-380, July.
    10. Antonio Diez de los Rios & Maral Shamloo, 2017. "Quantitative Easing and Long-Term Yields in Small Open Economies," Staff Working Papers 17-26, Bank of Canada.
    11. Diebold, Francis X. & Li, Canlin, 2006. "Forecasting the term structure of government bond yields," Journal of Econometrics, Elsevier, vol. 130(2), pages 337-364, February.
    12. Frank Smets, 1997. "Financial-asset Prices and Monetary Policy: Theory and Evidence," RBA Annual Conference Volume (Discontinued),in: Philip Lowe (ed.), Monetary Policy and Inflation Targeting Reserve Bank of Australia.
    13. Hang Qian, 2014. "A Flexible State Space Model And Its Applications," Journal of Time Series Analysis, Wiley Blackwell, vol. 35(2), pages 79-88, March.
    14. Ghysels, Eric, 2016. "Macroeconomics and the reality of mixed frequency data," Journal of Econometrics, Elsevier, vol. 193(2), pages 294-314.
    15. Brand, Claus & Mazelis, Falk, 2019. "Taylor-rule consistent estimates of the natural rate of interest," Working Paper Series 2257, European Central Bank.
    16. Holston, Kathryn & Laubach, Thomas & Williams, John C., 2017. "Measuring the natural rate of interest: International trends and determinants," Journal of International Economics, Elsevier, vol. 108(S1), pages 59-75.
    17. Litterman, Robert B, 1986. "Forecasting with Bayesian Vector Autoregressions-Five Years of Experience," Journal of Business & Economic Statistics, American Statistical Association, vol. 4(1), pages 25-38, January.
    18. Evans, Charles L. & Marshall, David A., 2007. "Economic determinants of the nominal treasury yield curve," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 1986-2003, October.
    19. Nelson, Charles R & Siegel, Andrew F, 1987. "Parsimonious Modeling of Yield Curves," The Journal of Business, University of Chicago Press, vol. 60(4), pages 473-489, October.
    20. Zuliu Hu, 1993. "The Yield Curve and Real Activity," IMF Staff Papers, Palgrave Macmillan, vol. 40(4), pages 781-806, December.
    21. GlennD. Rudebusch & Tao Wu, 2008. "A Macro-Finance Model of the Term Structure, Monetary Policy and the Economy," Economic Journal, Royal Economic Society, vol. 118(530), pages 906-926, July.
    22. Olivier Blanchard & Eugenio Cerutti & Lawrence Summers, 2015. "Inflation and Activity – Two Explorations and their Monetary Policy Implications," NBER Working Papers 21726, National Bureau of Economic Research, Inc.
    23. Kadiyala, K.R. & Karlsson, L.S., 1989. "Forecasting With Bayesian Vector Autoregressions," Purdue University Economics Working Papers 962, Purdue University, Department of Economics.
    24. repec:fip:fedfel:00145 is not listed on IDEAS
    25. Roberto S. Mariano & Yasutomo Murasawa, 2010. "A Coincident Index, Common Factors, and Monthly Real GDP," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 72(1), pages 27-46, February.
    26. Thomas Laubach & John C. Williams, 2003. "Measuring the Natural Rate of Interest," The Review of Economics and Statistics, MIT Press, vol. 85(4), pages 1063-1070, November.
    27. Diebold, Francis X. & Rudebusch, Glenn D. & Borag[caron]an Aruoba, S., 2006. "The macroeconomy and the yield curve: a dynamic latent factor approach," Journal of Econometrics, Elsevier, vol. 131(1-2), pages 309-338.
    28. Olivier Blanchard, 2016. "The Phillips Curve: Back to the '60s?," American Economic Review, American Economic Association, vol. 106(5), pages 31-34, May.
    29. Antonin Bergeaud & Gilbert Cette & Rémy Lecat, 2016. "Productivity Trends in Advanced Countries between 1890 and 2012," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(3), pages 420-444, September.
    30. Julien Garnier & Bjørn-Roger Wilhelmsen, 2009. "The natural rate of interest and the output gap in the euro area: a joint estimation," Empirical Economics, Springer, vol. 36(2), pages 297-319, May.
    31. Lawrence H. Summers, 2015. "Demand Side Secular Stagnation," American Economic Review, American Economic Association, vol. 105(5), pages 60-65, May.
    32. Scott Joslin & Marcel Priebsch & Kenneth J. Singleton, 2014. "Risk Premiums in Dynamic Term Structure Models with Unspanned Macro Risks," Journal of Finance, American Finance Association, vol. 69(3), pages 1197-1233, June.
    33. Joseph E. Stiglitz, 2016. "How to Restore Equitable and Sustainable Economic Growth in the United States," American Economic Review, American Economic Association, vol. 106(5), pages 43-47, May.
    34. Bikbov, Ruslan & Chernov, Mikhail, 2010. "No-arbitrage macroeconomic determinants of the yield curve," Journal of Econometrics, Elsevier, vol. 159(1), pages 166-182, November.
    35. repec:hal:journl:peer-00732517 is not listed on IDEAS
    36. Zuliu Hu, 1993. "The Yield Curve and Real Activity," IMF Working Papers 93/19, International Monetary Fund.
    37. Jennie Bai & Eric Ghysels & Jonathan H. Wright, 2013. "State Space Models and MIDAS Regressions," Econometric Reviews, Taylor & Francis Journals, vol. 32(7), pages 779-813, October.
    38. Plosser, Charles I. & Geert Rouwenhorst, K., 1994. "International term structures and real economic growth," Journal of Monetary Economics, Elsevier, vol. 33(1), pages 133-155, February.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    yield curve; potential growth; state-space model; Japan;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aim:wpaimx:1912. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Grégory Cornu). General contact details of provider: http://edirc.repec.org/data/amseafr.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.