Bond Supply and Excess Bond Returns in Zero‐Lower Bound and Normal Environments: Evidence from Japan | Zendy

Koeda Junko | Zendy

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Bond Supply and Excess Bond Returns in Zero‐Lower Bound and Normal Environments: Evidence from Japan

Author(s) -

Koeda Junko

Publication year - 2017

Publication title -

the japanese economic review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.205

H-Index - 28

eISSN - 1468-5876

pISSN - 1352-4739

DOI - 10.1111/jere.12117

Subject(s) - bond , economics , constraint (computer aided design) , government bond , yield (engineering) , arbitrage , zero (linguistics) , monetary economics , zero lower bound , econometrics , financial economics , monetary policy , finance , physics , mathematics , thermodynamics , geometry , linguistics , philosophy

We estimate a discrete‐time version of the Vayanos and Vila (2009) preferred‐habitat model, using Japanese government bond yield data. The estimated results indicate that bond excess returns become more sensitive to bond supply in the absence of a zero lower bound constraint unless arbitrageurs become willing to take on more risk.

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