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The Term Structure of Interest Rates and Monetary Policy During a Zero-Interest-Rate Period

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 intere...

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Bibliographic Details
Main Author: Nagayasu, Jun
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2003
Series:IMF Working Papers
Subjects:
Interest Rates
Finance
Econometric Analysis
Financial Services
Short Term Interest Rates
Yield Curve
Estimation
Demand For Money
Econometric Models
Banks And Banking
Zero Lower Bound
Interest Rates: Determination, Term Structure, And Effects
Estimation Techniques
Econometrics
Long Term Interest Rates
Econometrics & Economic Statistics
Monetary Policy
Japan
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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520 |a 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 

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