Impact of Global and Domestic Economic Variables on 10-Year Indian Government Bond Yield: An Empirical Study
IUP Journal of Applied Finance
; 28(2):5-23, 2022.
Article
in English
| ProQuest Central | ID: covidwho-1905127
ABSTRACT
Many research studies related to the impact of monetary policy and macroeconomic variables have already been conducted, but studies on combining this with global factors and its shocks are very few. To fill this research gap, the paper tries to find out the combined effect of global factors, macroeconomic variables, and monetary policy on 10-year Indian government bond yield using Structural Vector Autoregression (SVAR) and Autoregressive Distributive Lag (ARDL) model. This paper is designed to analyze the impact of various variables on 10-year Indian government bond yield, in the context of its continuous exposure to global factors like oil price shocks and changes in macroeconomic variables. The empirical findings, based on monthly data relating to the period January 2001 to April 2021, suggest that monetary policy has had a considerable impact on bond yields over a long-term horizon, which appears to be consistent with the prevailing Keynes theory. However, the output has the least impact on bond yield. This may be because the monthly data that is used in the study restricts to use GDP. Hence the Index of Industrial Production (IIP) data is used. Further, inflation shocks increase bond yields and global factors like oil price shocks have detrimental effects on bond yields for a long-time horizon of 24-36 months, whereas an increase in the 10-year US government bond yield results in an increase in 10-year Indian government bond yield.
Business And Economics--Banking And Finance; Monetary policy; Macroeconomics; Regression analysis; Yield curve; Bond markets; Retail stores; Gross Domestic Product--GDP; Inflation; Interest rates; Central banks; Expenditures; Government bonds; Budget deficits; COVID-19; United States--US; India; 52111:Monetary Authorities-Central Bank
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Collection:
Databases of international organizations
Database:
ProQuest Central
Type of study:
Experimental Studies
Language:
English
Journal:
IUP Journal of Applied Finance
Year:
2022
Document Type:
Article
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