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

Author

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  • Imre Ersoy
  • Selen Antmen

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.

Suggested Citation

  • Imre Ersoy & Selen Antmen, 2016. "The Determinants of Long-term Interest Rates in Eurozone: Taylor Rule and Governance Indicators," International Business Research, Canadian Center of Science and Education, vol. 9(9), pages 58-63, September.
    • Handle: RePEc:ibn:ibrjnl:v:9:y:2016:i:9:p:58-63
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    Citations

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    Cited by:

    1. Burak Byükoglu & Ahmet Šit & Ibrahim Halil Ekši, 2021. "Governance matters on non-performing loans: Evidence from emerging markets," PSL Quarterly Review, Economia civile, vol. 74(296), pages 75-91.

    More about this item

    Keywords

    government bond yields; governance indicators; panel analysis; Taylor rule;
    All these keywords.

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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