This paper examines the determinants of long-term bond yields through a panel data analysis of forward rates in 10 developed countries. We confirm that in addition to inflation expectations and the labor productivity growth rate, which influences the natural rate of interest, fiscal conditions,...

This paper estimates an affine term structure model (ATSM) and a shadow rate model (SRM) using Japanese, US, and UK data until March 2013. These models produce very different results, which are attributable to the ATSM's neglect of the zero lower bound (ZLB). The 10-year term premium estimated...

A macro-finance model combined with Black's (1995) model of interest rates as options is employed to investigate the relationship between the yield curve and monetary policy under Japan's zero interest rate environment. The results indicate a strong effect on nominal yields, but not on real...

We use a regime-switching model to examine how exchange rate volatilities influence the failure of uncovered interest parity (UIP). Main findings are as follows. First, exchange rate returns are significantly influenced by regime switches in the relationship between the returns and interest rate...

This paper derives analytical solutions for interest rate term structures in a new Keynesian framework. Theoretically, we consider the conditions for the positive average slope of nominal term structure, and show that the slope of a real one is positive. We then calibrate the model to find the...

The literature estimates the risk premia in the federal funds futures rates to extract market expectations of monetary policy by assuming that the forecast errors of the market expectations are zero on average, or that survey forecasts are good proxies for market expectations. These assumptions,...

The literature provides evidence that term spreads help predict output growth, inflation, and interest rates. This paper integrates and explains these predictability results by using an affine term structure model with observable macroeconomic factors for U.S. data. The results suggest that...

In this paper, we calculate the potential output and the output gap using a Bayesian-estimated DSGE model of Japan's economy. The model is a two-sector growth model that takes into account growth rate shocks including investment-goods sector-specific technological progress. For bridging the gap...

Many studies of inflation dynamics assume that in the presence of competitive labor markets firms adjust labor input only at the intensive margin. We consider labor market search and examine the role of the extensive margin for inflation dynamics by estimating three models with distinct labor...

This paper analyzes the revision to Japan's labor productivity, measured using Japan's System of National Accounts (SNA) data. We draw three main findings from our analysis. First, SNA data has been substantially revised in and after the second comprehensive revisions, as well as at the earlier...