Abstract

This paper uses Japanese data to investigate the relationship between monetary policy and the yield curve. We find that the response of the yield curve depends in an important way on the maintained hypothesis about how monetary policy affects the economy. Under the liquidity effect maintained hypothesis monetary policy only has transient effects on the yield curve. Under the costly price adjustment maintained hypothesis, however, monetary policy has large and persistent effects on yields of all maturities.

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Additional Information

ISSN
1538-4616
Print ISSN
0022-2879
Pages
pp. 141-162
Launched on MUSE
2006-04-24
Open Access
No
Archive Status
Archived 2007
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