We argue a source of time-varying premium (TVTP) in Japanese government bond market, and show that it is interest rate smoothing that causes empirical failures of expectation theory of term structure of interest rates. We estimate a regime switching ARCH model where an interest rate smoothing...

We argue a source of time-varying premium (TVTP) in Japanese government bond market, and show that it is interest rate smoothing that causes empirical failures of expectation theory of term structure of interest rates. We estimate a regime switching ARCH model where an interest rate smoothing...

This paper addresses the Goodhart's Law in a cash-in-advance economy with monetary policy regime switching. Using the Japanese data of the money velocity, we found that although our cash-credit model fails to generate a downward trend in the actual velocity, the model succeeds in terms of...