The long-run determinants of Indian government bond yields

Arbeitspapier

This paper investigates the long-term determinants of Indian government bonds' (IGB) nominal yields. It examines whether John Maynard Keynes's supposition that short-term interest rates are the key driver of long-term government bond yields holds over the long-run horizon, after controlling for various key economic factors such as inflationary pressure and measures of economic activity. It also appraises whether the government finance variable-the ratio of government debt to nominal income-has an adverse effect on government bond yields over a long-run horizon. The models estimated here show that in India, short-term interest rates are the key driver of long-term government bond yields over the long run. However, the ratio of government debt and nominal income does not have any discernible adverse effect on yields over a long-run horizon. These findings will help policymakers in India (and elsewhere) to use information on the current trend in short-term interest rates, the federal fiscal balance, and other key macro variables to form their long-term outlook on IGB yields, and to understand the implications of the government's fiscal stance on the government bond market.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Working Paper ; No. 881

Classification and Topics

• Classification: Wirtschaft ; Interest Rates: Determination, Term Structure, and Effects ; Monetary Policy, Central Banking, and the Supply of Money and Credit: General ; Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General ; General Financial Markets: General (includes Measurement and Data) ; Asset Pricing; Trading Volume; Bond Interest Rates ; Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
• Subject: Government Bond Yields ; Interest Rates ; Monetary Policy ; India

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Akram, Tanweer ; Das, Anupam
• Event: Veröffentlichung
• (who): Levy Economics Institute of Bard College
• (where): Annandale-on-Hudson, NY
• (when): 2017

Further information

• Handle: http://hdl.handle.net/10419/173490
• Last update: 10.03.2025, 11:43 AM CET