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The natural yield curve: its concept and measurement

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Abstract

This paper illustrates the concept of the natural yield curve and how to measure it. The natural yield curve extends the idea of the natural rate of interest defined at a single maturity to one defined for all maturities. If the actual real yield curve matches the natural yield curve, the output gap will converge to zero. An empirical analysis using data for Japan shows that past monetary easing programs expanded the gap between the actual real yield curve and the natural yield curve mainly for short and medium maturities and led to accommodative financial conditions. By contrast, the quantitative and qualitative monetary easing policy has expanded the gap for long maturities as well as short and medium maturities. The natural yield curve is expected to provide a useful benchmark in the conduct of both conventional monetary policy and unconventional monetary policy aiming to influence the entire yield curve.

Keywords

Natural yield curve Yield curve gap Natural rate of interest Interest rate gap Term structure 

JEL Classification

C32 E43 E52 E58 

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Copyright information

© Springer-Verlag GmbH Germany 2017

Authors and Affiliations

  1. 1.Bank of JapanTokyoJapan
  2. 2.Bank for International SettlementsBaselSwitzerland

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