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Markov-switching variance models and structural changes underlying Japanese bond yields: An inquiry into non-linear dynamics

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  • Kurita, Takamitsu

Abstract

This study employs a Markov-switching variance method to model structural changes in Japan's long-term government bond data and reveals three state classifications according to time-varying influences from various factors on bond yields. It examines three internal factors—Japan's short-term interest rate, its inflation rate and stock returns—and one external factor—yields on the US long-term government bond. The results of this study highlight the non-linear nature of Japanese bond yields over approximately the past three decades.

Suggested Citation

  • Kurita, Takamitsu, 2016. "Markov-switching variance models and structural changes underlying Japanese bond yields: An inquiry into non-linear dynamics," The Journal of Economic Asymmetries, Elsevier, vol. 13(C), pages 74-80.
    • Handle: RePEc:eee:joecas:v:13:y:2016:i:c:p:74-80
    DOI: 10.1016/j.jeca.2016.03.001
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    Cited by:

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    2. Cho, Sungjun & Hyde, Stuart & Liu, Liu, 2022. "The yen–dollar risk premium: A story of regime shifts in bond markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 78(C).
    3. Almaas, Synne S. & Kurita, Takamitsu, 2019. "Modelling the real yen–dollar rate and inflation dynamics based on international parity conditions," Journal of Asian Economics, Elsevier, vol. 61(C), pages 51-64.

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    More about this item

    Keywords

    Markov-switching variance models; Structural; Changes; Non-linear dynamics; Long-term bond yields;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C50 - Mathematical and Quantitative Methods - - Econometric Modeling - - - General
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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