Abstract
The article aims to empirically examine the determinants of the 10-, 7-, and 5-year Indian government bond yields over the study period of 1999–2021. For this purpose, three equations were modeled using various independent variables to account for relevant global and domestic drivers. The results were estimated using the ARDL model to identify the long and short-run determinants of the bond yields. The findings demonstrate differences between domestic and global factors' long- and short-term effects across various bond maturities. The long-run drivers of Indian government bond yields include short-term interest rates, economic policy uncertainty, foreign exchange reserves, GDP growth rate, VIX, and oil prices. However, in the short run, all the domestic and global variables affected the bond yields, including external debt, inflation, and general government debt, which did not impact the yields in the long run. These findings have substantial policy implications for the central bank and government in formulating appropriate monetary and fiscal policy mixes while considering global risk scenarios and also for the international and domestic investors for better portfolio allocation.
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Data Availability Statement
The data that support the findings of this study are available from the corresponding author, upon reasonable request.
Notes
Afonso (2010), Baldacci and Kumar (2010), Boubaker et al. (2019), Boysen-Hogrefe (2017), Capelle-Blancard et al. (2019), Dua and Raje (2014), Gupta et al. (2008), Izadi and Hassan (2018), Jaramillo and Weber (2013), Maltritz and Molchanov (2013), Miyajima et al. (2015), Peiris (2010), Senga et al. (2018), and Silvapulle et al. (2016).
Tests for unit roots that are not included in the study, however can be obtained from the authors upon request.
The summarised table can be obtained from the authors upon request.
The table that summarizes the values of information criteria for each lag across all three models is available from the authors upon request.
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Sehgal, S., Singh, J. Impact of Global and Domestic Factors on Indian Government Bond Yields. Asia-Pac Financ Markets (2024). https://doi.org/10.1007/s10690-024-09459-6
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DOI: https://doi.org/10.1007/s10690-024-09459-6