Do Term Premiums Matter? Transmission Via Exchange Rate Dynamics

Katagiri, Mitsuru; Takahashi, Koji

doi:10.2139/ssrn.3392729

Cited by 2 publications

(2 citation statements)

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“…These include Alpanda and Kabaca (2015), Burlon et al (2016), Harrison (2012, 2017, and Kolasa and Wesołowskiz (2020). Katagiri and Takahashi (2017) estimate a small open DSGE model that is built upon CCF (2012) using the data of Japan and the United States, focusing on how the exogenous changes in term premium is translated to the economy. 6.…”

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confidence: 99%

Quantifying Stock and Flow Effects of QE

Sudo¹,

Tanaka²

2021

J of Money Credit Banking

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In this paper, we focus on the transmission mechanism of quantitative-easing (QE) policy and address which matters most: the size of the bond purchases in each period (flow effects) or the total amount of bonds taken away from the private sectors (stock effects). To this end, we estimate a dynamic stochastic general equilibrium (DSGE) model in which short-and long-term bonds are imperfect substitutes due to market segmentation and preferred habitats, using Japan's data from the 1980s to 2017. We find that (i) Japan's data support imperfect substitutability between short-and long-term bonds, which implies that government bond purchases by the Bank of Japan (BOJ) reduce the term premium, exerting an expansionary effect on economic activity and prices; (ii) government bond purchases by BOJ have compressed the 10-year yields by 50-100 basis points as of the end of 2017; and (iii) the compression of the term premium has been mainly driven by stock effects, which underscores the importance of the size of BOJ's government bond holdings in determining the term premium.

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confidence: 99%

Quantifying Stock and Flow Effects of QE

Sudo¹,

Tanaka²

2021

J of Money Credit Banking

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“…The labor share in output is = 0.6, which is presented by Cooley and Prescott (1995). Following Katagiri and Takahashi (2017), we assume the share of imported consumption goods to be 1 − = 0.063. The macroeconomic data used in the following calculations are the averages of 2004-2013 in Japan.…”

Section: Appendix: Parameter Values For the Numerical Examplementioning

confidence: 99%

A simple aggregate demand analysis with dynamic optimization in a small open economy

Hashimoto

Ono

2020

Economic Modelling

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We develop an aggregate demand analysis of a small open economy based on all agents' dynamic optimization. Murota and Ono (2015) present a simple Keynesian cross analysis with dynamic optimization. This paper extends it to a small-country setting with two factors and two commodities, of which the structure is as simple as the conventional Keynesian cross analysis. We apply the model to examine the effects of changes in various parameters, such as the terms of trade, foreign asset holdings and government purchases, on aggregate demand. They are quite different from those under full employment and those of the Mundell-Fleming model.

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Do Term Premiums Matter? Transmission Via Exchange Rate Dynamics

Abstract: Papers in the Bank of Japan Working Paper Series are circulated in order to stimulate discussion and comments. Views expressed are those of authors and do not necessarily reflect those of the Bank. If you have any comment or question on the working paper series, please contact each author.

Cited by 2 publications

References 27 publications

Quantifying Stock and Flow Effects of QE

Quantifying Stock and Flow Effects of QE

A simple aggregate demand analysis with dynamic optimization in a small open economy

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