Analysis of the GKO market based on an examination of the term structure of interest rates

Sergey Drobyshevsky

Research Paper Series, 1999, issue 17P, 265

Abstract: This paper examines the developments in the Russian market for government short-term bonds (GKO) during the period 1993–1998. Based on an analysis of the dynamics of the weighted average yield on GKO and the entire term structure of GKO interest rates, the paper investigates the market’s reaction to changes in market participants’ expectations and to economic policy shocks. The paper presents the merits of each approach and demonstrates how studying the movement of the GKO yield curve allows us to supplement and confirm the results obtained from analyzing the dynamics of the average market interest rate. The limits of using monetary and fiscal policy to regulate GKO interest rates in the short term are analyzed. In addition, the hypothesis regarding the applicability of standard theoretical models—developed and tested in developed and emerging financial markets—to the analysis of the Russian GKO-OFZ market is tested and confirmed.

Keywords: Russian economy; GKO market; interest rates; monetary policy; fiscal policy (search for similar items in EconPapers)
JEL-codes: E43 E44 G14 (search for similar items in EconPapers)
Date: 1999
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