Australian Government Bonds' Nominal Yields: An Empirical Analysis

Tanweer Akram and Anupam Das

Economics Working Paper Archive from Levy Economics Institute

Abstract: The short-term interest rate is the main driver of the Commonwealth of Australia government bonds' nominal yields. This paper empirically models the dynamics of government bonds' nominal yields using the autoregressive distributed lag (ARDL) approach. Keynes held that the central bank exerts 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 models estimated here show 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 but statistically significant. However, there is no statistically discernable effect of the debt ratio on government bond yields.

Keywords: Government Bond Yields; Long-Term Interest Rate; Monetary Policy; Australian Government Bond Market; Commonwealth of Australia (search for similar items in EconPapers)
JEL-codes: E43 E50 E60 G10 G12 O16 (search for similar items in EconPapers)
Date: 2018-08
New Economics Papers: this item is included in nep-mac and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:lev:wrkpap:wp_910

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