IDEAS home Printed from https://ideas.repec.org/a/spr/jqecon/v22y2024i3d10.1007_s40953-024-00395-w.html
   My bibliography  Save this article

Asymmetric Impact of Monetary Policy on 10-Year G-Sec Yield in India

Author

Listed:
  • Saksham Sood

    (Reserve Bank of India (RBI))

  • Bichitrananda Seth

    (Reserve Bank of India (RBI))

  • Samir Ranjan Behera

    (Reserve Bank of India (RBI))

  • Deba Prasad Rath

    (Reserve Bank of India (RBI))

Abstract

This paper examines the asymmetric impact of monetary policy on central government’s 10-year g-sec yield using a non-linear autoregressive distributed lag model for the period Q1:2001–02 to Q4:2019–20. We find that monetary policy transmission to 10-year g-sec yield is partial and asymmetric in the long-run. A percentage point increase in the weighted average overnight call money rate (WACR) is, on an average, associated with 36–37 basis points rise in g-sec yield, whereas a percentage point fall in WACR leads to decrease in g-sec yield by 29–30 basis points. In the short-run, the asymmetric impact of WACR on the g-sec yield, though less conclusive, ranges between 18 and 20 basis points when WACR increases and 14–18 basis points when WACR decreases. The model includes market borrowings, GDP growth, crude oil price / inflation and yield on 10-year US government bonds as control variables. Our findings bear implications for monetary policy transmission to the real economy as well as for the market borrowing decisions of the fiscal authorities.

Suggested Citation

  • Saksham Sood & Bichitrananda Seth & Samir Ranjan Behera & Deba Prasad Rath, 2024. "Asymmetric Impact of Monetary Policy on 10-Year G-Sec Yield in India," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 22(3), pages 615-629, September.
    • Handle: RePEc:spr:jqecon:v:22:y:2024:i:3:d:10.1007_s40953-024-00395-w
    DOI: 10.1007/s40953-024-00395-w
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s40953-024-00395-w
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s40953-024-00395-w?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Pami Dua & Nishita Raje, 2023. "Determinants of Yields on Government Securities in India," Springer Books, in: Pami Dua (ed.), Macroeconometric Methods, chapter 0, pages 73-96, Springer.
    2. Pami Dua, 2023. "Monetary Policy Framework in India," Springer Books, in: Pami Dua (ed.), Macroeconometric Methods, chapter 0, pages 39-72, Springer.
    3. Joseph Dziwura & Irene Pedraza & Eli M. Remolona, 1995. "The short end of the forward convergence curve and asymmetric cat's tail convergence," Research Paper 9523, Federal Reserve Bank of New York.
    4. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    5. Poghosyan, Tigran, 2014. "Long-run and short-run determinants of sovereign bond yields in advanced economies," Economic Systems, Elsevier, vol. 38(1), pages 100-114.
    6. Joseph W. Gruber & Steven B. Kamin, 2012. "Fiscal Positions and Government Bond Yields in OECD Countries," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44(8), pages 1563-1587, December.
    7. Malešević Perović, Lena, 2015. "The impact of fiscal positions on government bond yields in CEE countries," Economic Systems, Elsevier, vol. 39(2), pages 301-316.
    8. Tanweer Akram & Anupam Das, 2017. "The Long-run Determinants of Indian Government Bond Yields," Economics Working Paper Archive wp_881, Levy Economics Institute.
    9. Chundakkadan, Radeef & Sasidharan, Subash, 2019. "Liquidity pull-back and predictability of government security yield volatility," Economic Modelling, Elsevier, vol. 77(C), pages 124-132.
    10. Bhattacharyya, Indranil & Sensarma, Rudra, 2008. "How effective are monetary policy signals in India," Journal of Policy Modeling, Elsevier, vol. 30(1), pages 169-183.
    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. Shivam Sehgal & Jaspal Singh, 2025. "Impact of Global and Domestic Factors on Indian Government Bond Yields," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 32(2), pages 465-488, June.
    2. B M, Lithin & chakraborty, Suman & iyer, Vishwanathan & M N, Nikhil & ledwani, Sanket, 2022. "Modeling asymmetric sovereign bond yield volatility with univariate GARCH models: Evidence from India," MPRA Paper 117067, University Library of Munich, Germany, revised 05 Jan 2023.
    3. Anupam Das & Tanweer Akram, 2020. "A Keynesian analysis of Canadian government securities yields," PSL Quarterly Review, Economia civile, vol. 73(294), pages 241-260.
    4. Tanweer Akram & Anupam Das, 2020. "Australian Government Bonds’ Nominal Yields: A Keynesian Perspective," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 15(01), pages 1-20, March.
    5. Tanweer Akram & Anupam Das, 2017. "The Dynamics Of Government Bond Yields In The Euro Zone," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 12(03), pages 1-18, September.
    6. Gunther Capelle-Blancard & Patricia Crifo & Marc-Arthur Diaye & Rim Oueghlissi & Bert Scholtens, 2016. "Environmental, Social and Governance (ESG) performance and sovereign bond spreads: an empirical analysis of OECD countries," Working Papers hal-01401718, HAL.
    7. repec:hal:spmain:info:hdl:2441/c5gs2rgi93abt1s4jkeabou1 is not listed on IDEAS
    8. Théo METZ, 2024. "New fiscal transparency index and public debt borrowing costs," Working Papers of BETA 2024-50, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    9. Tanweer Akram, 2021. "A Note Concerning the Dynamics of Government Bond Yields," The American Economist, Sage Publications, vol. 66(2), pages 323-339, October.
    10. Yu Hsing, 2015. "Determinants of the Government Bond Yield in Spain: A Loanable Funds Model," IJFS, MDPI, vol. 3(3), pages 1-9, July.
    11. Adi Brender & Sigal Ribon, 2015. "The Effect of Fiscal and Monetary Policies and the Global Economy on Real Yields of Israel Government Bonds," Bank of Israel Working Papers 2015.02, Bank of Israel.
    12. Tanweer Akram & Huiqing Li, 2020. "Some Empirical Models of Japanese Government Bond Yields Using Daily Data," Economics Working Paper Archive wp_962, Levy Economics Institute.
    13. Keyser, Alice & Paczos, Wojtek, 2023. "Sovereign risk, debt composition and exchange rate regimes," Finance Research Letters, Elsevier, vol. 58(PB).
    14. Asian Development Bank Institute, 2017. "Asia Bond Monitor - June 2016," Working Papers id:11793, eSocialSciences.
    15. Tanweer Akram & Anupam Das, 2017. "The Long-run Determinants of Indian Government Bond Yields," Economics Working Paper Archive wp_881, Levy Economics Institute.
    16. Xavier Timbeau & Ofce Observatoire Français Des Conjonctures Économiques, 2014. "From austerity to stagnation how to avoid the deflation trap," Post-Print hal-03603164, HAL.
    17. Tanweer Akram & Anupam Das, 2015. "Does Keynesian Theory Explain Indian Government Bond Yields?," Economics Working Paper Archive wp_834, Levy Economics Institute.
    18. Asian Development Bank (ADB) & Asian Development Bank (ADB) & Asian Development Bank (ADB) & Asian Development Bank (ADB), 2016. "Asia Bond Monitor - June 2016," ADB Reports RPS168158-2, Asian Development Bank (ADB).
    19. Tanweer Akram & Syed Al-Helal Uddin, 2021. "An empirical analysis of long-term Brazilian interest rates," PLOS ONE, Public Library of Science, vol. 16(9), pages 1-20, September.
    20. Animesh Bhattacharjee & Joy Das, 2022. "Assessing the long-run and short-run effect of monetary variables on stock market in the presence of structural breaks: evidence from liberalised India," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 14(2), pages 121-131, December.
    21. Akram, Tanweer & Li, Huiqing, 2017. "What keeps long-term U.S. interest rates so low?," Economic Modelling, Elsevier, vol. 60(C), pages 380-390.

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

    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:spr:jqecon:v:22:y:2024:i:3:d:10.1007_s40953-024-00395-w. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.