IDEAS home Printed from https://ideas.repec.org/a/bas/econst/y2025i1p113-132.html
   My bibliography  Save this article

Impact of COVID-19 Pandemic and Macroeconomics on Long-term Government Bond Yields Interest Rate in Emerging Markets: ARDL Approach

Author

Listed:
  • Xenaneira Shodrokova
  • Bernadette Robiani
  • Anna Yulianita

Abstract

This study examines the effect of the COVID-19 pandemic and macroeconomic variables on the Long-term Government Bond Yields Interest Rate. The data in this study was sourced from OECD statistical data and the World Bank with the quarterly period Q1 2016 – Q4 2023. This study used the Pooled Mean Group Autoregressive Distributed Lag (ARDL) analysis method of the data panel. The analysis results show that the COVID-19 pandemic has had a negative and significant impact on interest rates on long-term government bonds in Emerging Markets countries in the long term, indicating downward pressure in response to economic uncertainty. However, in the short term, the impact is insignificant, raising questions about other factors affecting interest rates. Rising inflation in the short run tends to increase interest rates, while the relationship between inflation and interest rates in the long run becomes more complex. Exchange rate depreciation can increase demand for long-term government bonds and interest rates in the long run, but it does not have a significant impact in the short term. The implications of these findings emphasize the need for Emerging Markets countries to take proactive action in formulating economic policies that are adaptive and responsive to rapidly changing market conditions.

Suggested Citation

  • Xenaneira Shodrokova & Bernadette Robiani & Anna Yulianita, 2025. "Impact of COVID-19 Pandemic and Macroeconomics on Long-term Government Bond Yields Interest Rate in Emerging Markets: ARDL Approach," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 113-132.
    • Handle: RePEc:bas:econst:y:2025:i:1:p:113-132
    as

    Download full text from publisher

    File URL: http://archive.econ-studies.iki.bas.bg/2025/2025_01/2025_01_06.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Robin Koepke, 2019. "What Drives Capital Flows To Emerging Markets? A Survey Of The Empirical Literature," Journal of Economic Surveys, Wiley Blackwell, vol. 33(2), pages 516-540, April.
    2. Jotikasthira, Chotibhak & Le, Anh & Lundblad, Christian, 2015. "Why do term structures in different currencies co-move?," Journal of Financial Economics, Elsevier, vol. 115(1), pages 58-83.
    3. Shahzad, Syed Jawad Hussain & Ferrer, Román & Ballester, Laura & Umar, Zaghum, 2017. "Risk transmission between Islamic and conventional stock markets: A return and volatility spillover analysis," International Review of Financial Analysis, Elsevier, vol. 52(C), pages 9-26.
    4. Wang, Yunxian & Wang, Xin & Zhang, Zheng & Cui, Zhanmin & Zhang, Yuan, 2023. "Role of fiscal and monetary policies for economic recovery in China," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 51-63.
    5. Janus, Jakub, 2021. "The COVID-19 shock and long-term interest rates in emerging market economies," Finance Research Letters, Elsevier, vol. 43(C).
    6. Jón Helgi Egilsson, 2020. "How raising interest rates can cause inflation and currency depreciation," Journal of Applied Economics, Taylor & Francis Journals, vol. 23(1), pages 450-468, January.
    7. He, Zhiguo & Nagel, Stefan & Song, Zhaogang, 2022. "Treasury inconvenience yields during the COVID-19 crisis," Journal of Financial Economics, Elsevier, vol. 143(1), pages 57-79.
    8. Manel Youssef & Khaled Mokni & Ahdi Noomen Ajmi, 2021. "Dynamic connectedness between stock markets in the presence of the COVID-19 pandemic: does economic policy uncertainty matter?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 7(1), pages 1-27, December.
    9. Markus Leippold & Felix Matthys, 2022. "Economic Policy Uncertainty and the Yield Curve [Pricing the term structure with linear regressions]," Review of Finance, European Finance Association, vol. 26(4), pages 751-797.
    10. Markus Leippold & Felix Matthys, 2022. "Economic Policy Uncertainty and the Yield Curve," Swiss Finance Institute Research Paper Series 22-36, Swiss Finance Institute.
    11. Michael D. Bauer & Glenn D. Rudebusch, 2014. "The Signaling Channel for Federal Reserve Bond Purchases," International Journal of Central Banking, International Journal of Central Banking, vol. 10(3), pages 233-289, September.
    12. N. Gregory Mankiw & Jeffrey A. Miron, 1986. "The Changing Behavior of the Term Structure of Interest Rates," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 101(2), pages 211-228.
    13. N. Gregory Mankiw, 1986. "The Term Structure of Interest Rates Revisited," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 17(1), pages 61-110.
    14. Feng, Gen-Fu & Yang, Hao-Chang & Gong, Qiang & Chang, Chun-Ping, 2021. "What is the exchange rate volatility response to COVID-19 and government interventions?," Economic Analysis and Policy, Elsevier, vol. 69(C), pages 705-719.
    15. Kung, Howard, 2015. "Macroeconomic linkages between monetary policy and the term structure of interest rates," Journal of Financial Economics, Elsevier, vol. 115(1), pages 42-57.
    16. Tanweer Akram & Anupam Das, 2015. "A Keynesian explanation of Indian government bond yields," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 38(4), pages 565-587, November.
    17. Charles Engel, 2016. "Exchange Rates, Interest Rates, and the Risk Premium," American Economic Review, American Economic Association, vol. 106(2), pages 436-474, February.
    18. Howard Kung, 2014. "Macroeconomic linkages between monetary policy and the term structure of interest rates," 2014 Meeting Papers 560, Society for Economic Dynamics.
    19. Yin, Jie & Han, Bingyan & Wong, Hoi Ying, 2022. "COVID-19 and credit risk: A long memory perspective," Insurance: Mathematics and Economics, Elsevier, vol. 104(C), pages 15-34.
    20. Lin, Boqiang & Su, Tong, 2020. "Does oil price have similar effects on the exchange rates of BRICS?," International Review of Financial Analysis, Elsevier, vol. 69(C).
    21. Igor Britchenko & Oksana Polinkevych & Viktor Trynchuk & Inna Khovrak, 2023. "The Impact of COVID-19 on the Philosophy of Doing Business in a Sustainable Environment," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 100-116.
    22. Barua, Suborna, 2020. "Understanding Coronanomics: The economic implications of the coronavirus (COVID-19) pandemic," MPRA Paper 99693, University Library of Munich, Germany.
    23. Friedman, Benjamin M, 1980. "The Determination of Long-Term Interest Rates: Implications for Fiscal and Monetary Policies," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(2), pages 331-352, Special I.
    24. Wei, Xiaoyun & Han, Liyan, 2021. "The impact of COVID-19 pandemic on transmission of monetary policy to financial markets," International Review of Financial Analysis, Elsevier, vol. 74(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. M. A. Akhtar, 1995. "Monetary Policy And Long‐Term Interest Rates: A Survey Of Empirical Literature," Contemporary Economic Policy, Western Economic Association International, vol. 13(3), pages 110-130, July.
    2. Bȩdowska-Sójka, Barbara & Kliber, Agata, 2022. "Impact of COVID-19 on sovereign risk: Latin America versus Asia," Finance Research Letters, Elsevier, vol. 47(PA).
    3. Alex Ilek & Tanya Suchoy & Nir Klein, 2006. "Estimating the premium implicit in the yields of Treasury Bills," Israel Economic Review, Bank of Israel, vol. 4(2), pages 53-83.
    4. Christina Christou & Konstantinos Eleftheriou & Patroklos Patsoulis, 2024. "Convergence behavior of sovereign bond yields in the EU and COVID-19 government responses," Letters in Spatial and Resource Sciences, Springer, vol. 17(1), pages 1-16, December.
    5. Franck Martin & Jiangxingyun Zhang, 2020. "La structure des taux revisitée pour période de crise : entre contagion, flight to quality et quantitative easing," Revue économique, Presses de Sciences-Po, vol. 71(4), pages 623-665.
    6. Taisuke Nakata & Hiroatsu Tanaka, 2020. "Equilibrium Yield Curves and the Interest Rate Lower Bound," CARF F-Series CARF-F-482, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
    7. Xu, Yingying & Lien, Donald, 2022. "COVID-19 and currency dependences: Empirical evidence from BRICS," Finance Research Letters, Elsevier, vol. 45(C).
    8. Bats, Joost & Hoondert, Jurian J.A., 2022. "The relationship between central bank auctions and bill market liquidity," Working Paper Series 2708, European Central Bank.
    9. Cross, Jamie L. & Hoogerheide, Lennart & Labonne, Paul & van Dijk, Herman K., 2024. "Bayesian mode inference for discrete distributions in economics and finance," Economics Letters, Elsevier, vol. 235(C).
    10. Bulkley, George & Harris, Richard D.F. & Nawosah, Vivekanand, 2011. "Revisiting the expectations hypothesis of the term structure of interest rates," Journal of Banking & Finance, Elsevier, vol. 35(5), pages 1202-1212, May.
    11. Mayfield, E. Scott & Murphy, Robert G., 1996. "Explaining the term structure of interest rates: A panel data approach," Journal of Economics and Business, Elsevier, vol. 48(1), pages 11-21, February.
    12. Engsted, Tom & Tanggaard, Carsten, 1994. "Cointegration and the US term structure," Journal of Banking & Finance, Elsevier, vol. 18(1), pages 167-181, January.
    13. Procasky, William J. & Yin, Anwen, 2023. "The impact of COVID-19 on the relative market efficiency and forecasting ability of credit derivative and equity markets," International Review of Financial Analysis, Elsevier, vol. 90(C).
    14. Lin, Jianhao & Fan, Jiacheng & Zhang, Yifan, 2025. "Information Dissemination and the Monetary Policy Uncertainty Premium: Evidence from China," Journal of Banking & Finance, Elsevier, vol. 171(C).
    15. repec:zbw:bofrdp:1999_012 is not listed on IDEAS
    16. Barsky, Robert B. & Mankiw, N. Gregory & Miron, Jeffrey A. & Weill, David N., 1988. "The worldwide change in the behavior of interest rates and prices in 1914," European Economic Review, Elsevier, vol. 32(5), pages 1123-1147, June.
    17. Stijn Claessens & M Ayhan Kose, 2018. "Frontiers of macrofinancial linkages," BIS Papers, Bank for International Settlements, number 95.
    18. Schotman, Peter C., 1997. "Small sample properties of the regression test of the expectations model of the term structure1," Economics Letters, Elsevier, vol. 57(2), pages 129-134, December.
    19. Lin, Mucai & Niu, Linlin, 2021. "Echo over the great wall: Spillover effects of QE announcements on Chinese yield curve," Journal of International Money and Finance, Elsevier, vol. 111(C).
    20. Balduzzi, Pierluigi & Bertola, Giuseppe & Foresi, Silverio, 1997. "A model of target changes and the term structure of interest rates," Journal of Monetary Economics, Elsevier, vol. 39(2), pages 223-249, July.
    21. Benjamin Tabak, 2009. "Testing the expectations hypothesis in the Brazilian term structure of interest rates: a cointegration analysis," Applied Economics, Taylor & Francis Journals, vol. 41(21), pages 2681-2689.

    More about this item

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bas:econst:y:2025:i:1:p:113-132. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Diana Dimitrova (email available below). General contact details of provider: https://edirc.repec.org/data/ikbasbg.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.