The Term Structure of Interest Rates and Monetary Policy During a Zero-Interest-Rate Period
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Summary:
This paper empirically evaluates the validity of the term structure of interest rates in a low-interest-rate environment. Applying a time-series method to high-frequency Japanese data, the term-structure model is found to be useful for economic analysis only when interest rates are high. When interest rates are low, the usefulness of the model declines, since the interest spread contains little information that can be used for predicting future economic activity. The term-structure relationship is also weakened by the Bank of Japan's use of interest rate smoothing.
Series:
Working Paper No. 2003/208
Subject:
Econometric analysis Estimation techniques Financial services Long term interest rates Short term interest rates Yield curve Zero lower bound
English
Publication Date:
October 1, 2003
ISBN/ISSN:
9781451874723/1018-5941
Stock No:
WPIEA2082003
Pages:
31
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