Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/209149
Authors: 
Akram, Tanweer
Li, Huiqing
Year of Publication: 
2018
Series/Report no.: 
Working Paper No. 906
Abstract: 
This paper employs a Keynesian perspective to explain why Japanese government bonds' (JGBs) nominal yields have been low for more than two decades. It deploys several vector error correction (VEC) models to estimate long-term government bond yields. It shows that the low short-term interest rate, induced by the Bank of Japan's (BoJ) accommodative monetary policy, is mainly responsible for keeping long-term JGBs' nominal yields exceptionally low for a protracted period. The results also demonstrate that higher government debt and deficit ratios do not exert upward pressure on JGBs' nominal yields. These findings are relevant to ongoing policy debates in Japan and other advanced countries about government bond yields, fiscal sustainability, fiscal policy, functional finance, monetary policy, and financial stability.
Subjects: 
Japanese Government Bonds
Long-Term Interest Rate
Nominal Bond Yields
Monetary Policy
Bank of Japan
John Maynard Keynes
JEL: 
E43
E50
E58
E60
G10
G12
Document Type: 
Working Paper

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