We investigate the economic consequences of both conditional conservatism and unconditional conservatism from the perspective of stock market investors. Specifically, we empirically analyze how these two types of conservatism affect corporate investment levels, risk taking, and shareholder value...

This paper examines how and to what extent parameter estimates can be biased in a dynamic stochastic general equilibrium (DSGE) model that omits the zero lower bound (ZLB) constraint on the nominal interest rate. Our Monte Carlo experiments using a standard sticky-price DSGE model show that no...

Quantitative monetary policy at the zero interest bound should be understood as a gbond market carry trade.h Net interest earnings on the front end of the monetary carry trade should be retained-to guard against the central bank having to create reserves (or borrow) to pay interest on reserves...

In this paper I investigate the effects of changes in demand structure caused by population aging on the Japanese economy using a multi-sector new Keynesian model with job creation/destruction. I consider upward revisions in forecast for the speed of Japanese population aging as unexpected...

We compare the dynamics of inflation and bond yields leading up to a sovereign debt crisis in settings where asset markets are frictionless to other settings with financial frictions. As compared to the case with frictionless asset markets, an asset market structure with financial frictions...

What are the fiscal consequences of legislative term limits? To answer this question, we first study how the average seniority of a legislature affects government spending. We develop a legislative bargaining model that predicts a U-shaped relationship between average seniority and spending: the...

This paper conducts a comparative analysis of the diverse methods for estimating the Japanese government bond (JGB) zero coupon yield curve (hereafter, zero curve) according to the criteria that estimation methods should meet. Previous studies propose many methods for estimating the zero curve...

This article analyzes whether daily realized volatility, which is the sum of squared intraday returns over a day, is useful for option pricing. Different realized volatilities are calculated with or without taking account of microstructure noise and with or without using overnight and lunch-time...

This paper reassesses the results of Japanfs financial deregulation over the last two decades. Japanfs Big Bang sought to transform a highly regulated bank-centered financial system to a transparent, market-centered financial system to revitalize Japanfs economy and aging society. Prior...

In this study, we derive an analytical solution for expected loss and the higher moment of the discounted loss distribution for a collateralized loan. To ensure nonnegative values for intensity and interest rate, we assume a quadratic Gaussian process for default intensity and discount interest...