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Australian Government Bonds’ Nominal Yields: A Keynesian Perspective

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  • TANWEER AKRAM

    (General Motors, 300 Renaissance Center, Detroit, MI 48243, USA)

  • ANUPAM DAS

    (Department of Economics, Justice, and Policy Studies, Mount Royal University, 4825 Mount Royal Gate SW, Calgary, Alberta, Canada T3E 6K6, Canada)

Abstract

This paper empirically models the dynamics of Australian government bonds’ nominal yields using the autoregressive distributed lag (ARDL) approach. Keynes held that the central bank exerts a decisive influence on government bond yields because the central bank’s policy rate and other monetary policy actions determine the short-term interest rate, which in turn affects long-term government bonds’ nominal yields. The estimated models show that the short-term interest rate is the main driver of Australian government bonds’ nominal yields. These results imply that Keynes’s conjecture applies in the case of Australian government bonds’ nominal yields. Furthermore, the effect of the budget balance ratio on government bond yields is small though statistically significant. There is no statistically discernable effect of the debt ratio on government bond yields.

Suggested Citation

  • 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.
    • Handle: RePEc:wsi:afexxx:v:15:y:2020:i:01:n:s2010495220500037
    DOI: 10.1142/S2010495220500037
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