Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/209153 
Year of Publication: 
2018
Series/Report no.: 
Working Paper No. 910
Publisher: 
Levy Economics Institute of Bard College, Annandale-on-Hudson, NY
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.
Subjects: 
Government Bond Yields
Long-Term Interest Rate
Monetary Policy
Australian Government Bond Market
Commonwealth of Australia
JEL: 
E43
E50
E60
G10
G12
O16
Document Type: 
Working Paper

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