The term structure of Japanese interest rates:: The equilibrium spread with asymmetric dynamics

Abstract

This paper examines the dynamic adjustment to long-run relationship between Japanese interest rates of different maturities. We employ a new estimation methodology that permits threshold and the momentum-threshold adjustment towards equilibrium. The results support the expectations hypothesis of the term structure of interest rate using Japanese interest rates. As in the case of the United States, it shown that the error-correction process is best estimated as asymmetric. J. Japanese Int. Economies 18 (1) (2004) 84–98.