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The Long-Run Determinants of Indian Government Bond Yields

Author

Listed:
  • Tanweer Akram

    (Director of Global Public Policy and Economics, Thrivent Financial, Minneapolis, United States. Author email: tanweer.akram@thrivent.com)

  • Anupam Das

    (Professor, Department of Economics, Justice, and Policy Studies at Mount Royal University, Alberta, Canada. Author email: adas@mtroyal.ca)

Abstract

This paper investigates the long-term determinants of the nominal yields of Indian government bonds (IGBs). It examines whether John Maynard Keynes’ supposition that the short-term interest rate is the key driver of the long-term government bond yield holds over the long run, after controlling for key economic factors. It also appraises if the government fiscal variable has an adverse effect on government bond yields over the long run. The models estimated in this paper show that in India the short-term interest rate is the key driver of the long-term government bond yield over the long run. However, the government debt ratio does not have any discernible adverse effect on IGB yields over the long run. These findings will help policy makers to (i) use information on the current trend of the short-term interest rate and other key macro variables to form their long-term outlook about IGB yields, and (ii) understand the policy implications of the government's fiscal stance.

Suggested Citation

  • Tanweer Akram & Anupam Das, 2019. "The Long-Run Determinants of Indian Government Bond Yields," Asian Development Review, MIT Press, vol. 36(1), pages 168-205, March.
    • Handle: RePEc:tpr:adbadr:v:36:y:2019:i:1:p:168-205
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    File URL: http://www.mitpressjournals.org/doi/pdf/10.1162/adev_a_00127
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    Citations

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    Cited by:

    1. Moumita Paul & Kalluru Siva Reddy, 2022. "US QE and the Indian Bond Market," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 20(1), pages 137-157, March.
    2. B M, Lithin & chakraborty, Suman & iyer, Vishwanathan & M N, Nikhil & ledwani, Sanket, 2022. "Modeling asymmetric sovereign bond yield volatility with univariate GARCH models: Evidence from India," MPRA Paper 117067, University Library of Munich, Germany, revised 05 Jan 2023.
    3. Verner, Robert & Tkáč, Michal, 2023. "On the predictability of bonds," Finance Research Letters, Elsevier, vol. 57(C).
    4. Tanweer Akram & Anupam Das, 2020. "Australian Government Bonds’ Nominal Yields: A Keynesian Perspective," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 15(01), pages 1-20, March.
    5. Tanweer Akram, 2021. "A Note Concerning the Dynamics of Government Bond Yields," The American Economist, Sage Publications, vol. 66(2), pages 323-339, October.
    6. Sheunesu Zhou, 2021. "Examining the Sources of Sovereign Risk for South Africa: A Time Varying Flexible Least Squares Approach," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 9(1), pages 29-45.
    7. Katlego Kola & Tumellano Sebehela, 2021. "Market The (De)merits of using Integral Transforms in Predicting Structural Break Points," International Real Estate Review, Global Social Science Institute, vol. 24(3), pages 405-467.
    8. C, Prasanth & Chakraborty, Lekha & K Shihab, Nehla, 2024. "Interest Rate Determination in India: Analyzing RBI’s Post-Covid Monetary Policy Stance Using High Frequency Data," MPRA Paper 122345, University Library of Munich, Germany.
    9. Anupam Das & Tanweer Akram, 2020. "A Keynesian analysis of Canadian government securities yields," PSL Quarterly Review, Economia civile, vol. 73(294), pages 241-260.

    More about this item

    Keywords

    government bond yields; India; interest rates; monetary policy;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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