Monetary Policy and the Term Structure of Interest Rates in Japan

R. Braun and Etsuro Shioji

No CIRJE-F-252, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo

Abstract: This 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 doesn't 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.

Pages: 41 pages
Date: 2003-12
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-sea
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Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Monetary Policy and the Term Structure of Interest Rates in Japan (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2003cf252

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