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The natural yield curve: its concept and developments in Japan

Author

Listed:
  • Kei Imakubo

    (Bank of Japan)

  • Haruki Kojima

    (Bank of Japan)

  • Jouchi Nakajima

    (Bank of Japan)

Abstract

Recent monetary policies aiming to influence the entire yield curve have come to play a more prominent role in advanced economies as there has been little room for further lowering the short-term interest rate. This means that the effects of monetary easing cannot be fully captured by the single gap between the actual real short-term rate of interest and the corresponding natural rate of interest. This article proposes the concept of the natural yield curve, which extends the idea of the natural rate of interest defined at a specific maturity to one defined for all maturities. The gap between the actual real yield curve and the natural yield curve enables us to measure not only the effects of conventional monetary policy through short-term interest rate control but also those of unconventional monetary policy through government bond purchases and forward guidance.

Suggested Citation

  • Kei Imakubo & Haruki Kojima & Jouchi Nakajima, 2015. "The natural yield curve: its concept and developments in Japan," Bank of Japan Research Laboratory Series 15-E-3, Bank of Japan.
    • Handle: RePEc:boj:bojlab:lab15e03
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    File URL: http://www.boj.or.jp/en/research/wps_rev/lab/lab15e03.htm
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    Citations

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    Cited by:

    1. Han, Fei, 2024. "The impact of demographic change on the natural rate of interest in Japan," Japan and the World Economy, Elsevier, vol. 69(C).
    2. Leeper, E.M. & Leith, C., 2016. "Understanding Inflation as a Joint Monetary–Fiscal Phenomenon," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 2305-2415, Elsevier.
    3. Sohei Kaihatsu & Koichiro Kamada & Mitsuru Katagiri, 2016. "Theoretical Foundations for Quantitative Easing," IMES Discussion Paper Series 16-E-04, Institute for Monetary and Economic Studies, Bank of Japan.

    More about this item

    Keywords

    Natural yield curve; Yield curve gap; Natural rate of interest; Interest rate gap;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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