The Determinants of Long-term Interest Rates in Eurozone: Taylor Rule and Governance Indicators

Imre Ersoy and Selen Antmen

International Business Research, 2016, vol. 9, issue 9, 58-63

Abstract: This study aims to search for the determinants of long-term interest rates in the Eurozone. Panel data analysis is employed for 14 Eurozone countries for the period of 2002-2014 to analyze the determinants of long-term interest rates. This study is carried out to find out whether the Worldwide Governance Indicators (WGI), Taylor (1993) rule and also the Eurozone crisis, as a control variable, have an impact on long-term interest rates. As WGI, Voice and Accountability, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law and Control of Corruption are used. The first finding of the empirical study is that inflation gap has an impact on long-term interest rates. Another finding of the study is that Political Stability and Absence of Violence/Terrorism, Government Effectiveness and Regulatory Quality effects long-term interest rates in 14 panel cross-sections. Besides, the analysis shows that the financial crisis in Eurozone as control variable affected long-term interest rates, as would be expected.

Keywords: government bond yields; governance indicators; panel analysis; Taylor rule (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ibn:ibrjnl:v:9:y:2016:i:9:p:58-63

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