The Impact of Monetary and Fiscal Policy Uncertainty on Bond Yields: Findings from a Panel of Developed Countries (1999–2025)

This study examines how monetary policy uncertainty (MPU) and fiscal policy uncertainty (FPU) affect government bond yields across eleven developed economies from January 1999 to March 2025. It uses five- and ten-year bond yields as the dependent variables. The analysis employs panel quantile regression to capture the heterogeneous effects of uncertainty across market conditions, complemented by fixed-effects models with Driscoll-Kraay standard errors to ensure robustness. Findings indicate that MPU significantly increases bond yields, whereas FPU has a negative effect. These effects are more pronounced during adverse market conditions and tend to diminish as conditions improve. Moreover, both forms of uncertainty have a stronger impact on short-term bond yields than on long-term yields. The results suggest that policy uncertainty affects bond markets differently by maturity and exhibits asymmetry. To promote financial stability and market efficiency, policymakers should endeavor to mitigate uncertainty through transparent and credible monetary and fiscal policies.