Potential growth and natural yield curve in Japan
Résumé
We estimate the yield curve gap in Japan and examine whether it has contributed to the sustained low growth and low inflation rates observed since the beginning 2000s. We use a semi-structural empirical model that generalizes Laubach and Williams’ approach, considering the entire range of maturities of the interest rates and dealing with the issue of mixed frequency sampling. An important result is that, even in the absence of a zero lower bound, monetary and fiscal policies proved ineffective in bringing the Japanese economy out of a situation of prolonged stagnation and low inflation. This happened even when the yield curve moved below its natural level.