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Determinants of New Zealand bond yields

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    Abstract

    This paper examines the driving factors of New Zealand bond yields over the 1988-1997 period. The results indicate that: . the general analytical framework implied by the Uncovered Interest Parity (UIP) relation finds some support in the data. . in the long run, short term real bond yields are related to US real bond yields, currency expectations and expectations of the future stance of domestic monetary policy vis a vis the stance offshore. . long-term real bond yields are related to Australian real bond yields, currency expectations, inflation uncertainty and relative monetary policy expectations. . in recent years, domestic bond yields have been more closely related to offshore yields suggesting increased integration between the domestic and international capital markets. . increased perceptions of political risk appears to have played an important role in the rise in domestic long bond yields during the first half of 1996.

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    File URL: http://www.rbnz.govt.nz/research_and_publications/discussion_papers/1998/g98_1.pdf
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    Bibliographic Info

    Paper provided by Reserve Bank of New Zealand in its series Reserve Bank of New Zealand Discussion Paper Series with number G98/1.

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    Length: 36p
    Date of creation: Jan 1998
    Date of revision:
    Handle: RePEc:nzb:nzbdps:1998/01

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    1. Howard Howe & Charles Pigott, 1991. "Determinants of long-term interest rates: an empirical study of several industrial countries," Quarterly Review, Federal Reserve Bank of New York, Federal Reserve Bank of New York, issue Win, pages 12-28.
    2. Robert J. Barro & Xavier Sala-i-Martin, 1990. "World Real Interest Rates," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER Macroeconomics Annual 1990, Volume 5, pages 15-74 National Bureau of Economic Research, Inc.
    3. Campbell, John & Shiller, Robert, 1987. "Cointegration and Tests of Present Value Models," Scholarly Articles 3122490, Harvard University Department of Economics.
    4. Ford, Robert & Laxton, Douglas, 1999. "World Public Debt and Real Interest Rates," Oxford Review of Economic Policy, Oxford University Press, Oxford University Press, vol. 15(2), pages 77-94, Summer.
    5. Wright, S., 1995. "Forecasting the Bond Market," Cambridge Working Papers in Economics, Faculty of Economics, University of Cambridge 9515, Faculty of Economics, University of Cambridge.
    6. William Lee & Eswar Prasad, 1994. "Changes in the Relationship Between the Long-Term Interest Rate and its Determinants," IMF Working Papers, International Monetary Fund 94/124, International Monetary Fund.
    7. Adrian Orr & Malcolm Edey & Michael Kennedy, 1995. "The Determinants of Real Long-Term Interest Rates: 17 Country Pooled-Time-Series Evidence," OECD Economics Department Working Papers, OECD Publishing 155, OECD Publishing.
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    Cited by:
    1. Lucjan T. Orlowski & Kirsten Lommatzsch, 2005. "Bond Yield Compression in the Countries Converging to the Euro," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan wp799, William Davidson Institute at the University of Michigan.
    2. Buckle, Robert A. & Kim, Kunhong & Kirkham, Heather & McLellan, Nathan & Sharma, Jarad, 2007. "A structural VAR business cycle model for a volatile small open economy," Economic Modelling, Elsevier, Elsevier, vol. 24(6), pages 990-1017, November.
    3. Aaron Drew & L Christopher Plantier, 2000. "Interest rate smoothing in New Zealand and other dollar bloc countries," Reserve Bank of New Zealand Discussion Paper Series, Reserve Bank of New Zealand DP2000/10, Reserve Bank of New Zealand.
    4. Robert A Buckle & Kunhong Kim & Heather Kirkham & Nathan McLellan & Jared Sharma, 2002. "A structural VAR model of the New Zealand business cycle," Treasury Working Paper Series, New Zealand Treasury 02/26, New Zealand Treasury.
    5. Suzan Hol, 2006. "Determinants of long-term interest rates in the Scandinavian countries," Discussion Papers, Research Department of Statistics Norway 469, Research Department of Statistics Norway.

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