Corpus ID: 55843872

Monetary Policy and the Yield Curve at Zero Interest: The Macro-Finance Model of Interest Rates as Options

@inproceedings{Ichiue2006MonetaryPA,
  title={Monetary Policy and the Yield Curve at Zero Interest: The Macro-Finance Model of Interest Rates as Options},
  author={Hibiki Ichiue and Yoichi Ueno},
  year={2006}
}
A macro-finance model combined with Black's (1995) model of interest rates as options is employed to investigate the relationship between the yield curve and monetary policy under Japan's zero interest rate environment. The results indicate a strong effect on nominal yields, but not on real yields, under current Bank of Japan policy. This is because the zero rate creates a close link between real yields and expected inflation rates, which are harder to control than expected nominal short rates… Expand
EQUILIBRIUM INTEREST RATE AND THE YIELD CURVE IN A LOW INTEREST RATE ENVIRONMENT
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