Scaling behaviour of Treasury rates in India

Gourishankar Hiremath, Kritarth Jha and Ankur Agarwal

Macroeconomics and Finance in Emerging Market Economies, 2019, vol. 12, issue 1, 1-23

Abstract: This study finds that the scaling properties of India’s nominal and real Treasury rates are time varying, as is their multiscaling behaviour. We observe an association between the scaling behaviour of interest rates and the stages of development of the bill market. Interest rate behaviour is influenced by structural reforms, microstructure changes, and improvement in the operational efficiency of the Treasury market. Our findings suggest that monetary policy shocks have a persistent effect, but rates eventually revert to the mean. We show that the adaptive market hypothesis helps to delineate the dynamics of an emerging market undergoing a series of institutional and structural changes.

Date: 2019
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DOI: 10.1080/17520843.2017.1358757

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