Japanese Yield Curves In and Out of a Zero Rate Environmnet: A Macro-Finance Perspective (Revised in November 2011)

Abstract

This paper applies a tractable two-regime macro-finance affine term structure model to empirically investigate macroeconomic effects on Japanese government bond (JGB) yields in and out of a zero interest rate environment. The estimated results qualitatively assess how differently deflation and low growth contribute to lowering longer-term JGB yields between the normal and zero rate regimes.