Macroeconomic factors and government bond yield in Indonesia
-
Author(s)Naning FatmawatieLink to ORCID Index: https://orcid.org/0000-0002-3647-051X
,
Endri EndriLink to ORCID Index: https://orcid.org/0000-0002-8613-6149
,
Destyanah Husein
-
DOIhttp://dx.doi.org/10.21511/pmf.13(1).2024.08
-
Article InfoVolume 13 2024, Issue #1, pp. 95-105
- 352 Views
-
112 Downloads
This work is licensed under a
Creative Commons Attribution 4.0 International License
The issuance of bonds by the government attracts the interest of many investors, including foreigners. The government must understand the factors determining bond yields for managing government debt. This study aims to investigate the effect of domestic and global macroeconomic variables on government bond yields in Indonesia. The paper uses monthly data from November 2014 to December 2022. The research sample comprises government bonds with 5, 10, and 15-year tenor bonds. The GARCH (1,1) and GARCH-M (1,1) models are applied to estimate and analyze the determinants of government bond yields. Research findings reveal that Indonesian interest rates significantly affect the yield of 10- and 15-year tenor bonds. Inflation has no impact on bond yields across all tenors. The increase in foreign exchange reserves reduces bond yields in all tenors. The Indonesian stock exchange index is detrimental to long-term bond yields. The exchange rate has a positive impact on bond yields in all tenors. World oil prices significantly impact yields on 5- and 10-year tenor bonds. The Fed’s interest rate positively affects the yield on the 15-year tenor bond. The implication of these findings for the Indonesian government is the implementation of several aspects of economic and financial policies that can improve state debt management and financial market stability.
- Keywords
-
JEL Classification (Paper profile tab)G12, G23, E43, C58
-
References52
-
Tables4
-
Figures1
-
- Figure 1. Conceptual model
-
- Table 1. Variable operationalization
- Table 2. Descriptive statistics
- Table 3. AIC and SC test results
- Table 4. GARCH model estimation results
-
- Abrahams, M., Adrian, T., Crump, R. K., Moench, E., & Yu, R. (2016). Decomposing real and nominal yield curves. Journal of Monetary Economics, 84, 182-200.
- Adiwibowo, P., & Sihombing, P. (2019). Determinant of government bond yields. Dinasti International Journal of Digital Business Management, 1(1), 86-99.
- Agusty, R. M., & Marsoem, B. S. (2021). Determinant yield government bond traded from 2016 to 2021. Dinasti International Journal of Management Science, 3(1), 67-82.
- Akram, T., & Das, A. (2019). The long-run determinants of Indian government bond yields. Asian Development Review, 36(1), 168-205.
- Alexopoulou, I., Bunda, I., & Ferrando, A. (2010). Determinants of government bond spreads in new EU countries. Eastern European Economics, 48(5), 5-37.
- Arshad, H., Muda, R., & Ismah, O. (2018). Impact of exchange rate and oil price on the yield of sovereign bond and sukuk: Evidence from Malaysian capital market. Journal of Emerging Economies & Islamic Research, 5(4), 27-41.
- Balcilar, M., Gupta, R., Wang, S., & Wohar, M. E. (2020). Oil price uncertainty and movements in the US government bond risk premia. The North American Journal of Economics and Finance, 52, Article 101147.
- Banerjee, A. (2021). Drivers of sovereign bond yields in India. Indian Journal of Economics and Development, 17(3), 671-680.
- Bollerslev, T. (1987). A Conditionally Heteroskedastic Time Series Model for Speculative Prices and Rates of Return. The Review of Economics and Statistics, 69(3), 542-547.
- Caplinska, A., & Tvaronavičienė, M. (2020). Creditworthiness place in credit theory and methods of its evaluation. Entrepreneurship and Sustainability Issues, 7(3), 2542-2555.
- Cho, D. C., Eun, C. S., & Senbet, L. W. (1986). International arbitrage pricing theory: An empirical investigation. The Journal of Finance, 41(2), 313-329.
- Claessens, S., Klingebiel, D., & Schmukler, S. L. (2007). Government bonds in domestic and foreign currency: The role of institutional and macroeconomic factors. Review of International Economics, 15(2), 370-413.
- Cochrane, J. H., & Piazzesi, M. (2002). The fed and interest rates – A high-frequency identification. American Economic Review, 92(2), 90-95.
- Dai, Z., & Kang, J. (2021). Bond yield and crude oil prices predictability. Energy Economics, 97, Article 105205.
- Endri, E., Abidin, Z., Simanjuntak, P, T., & Nurhayati, I. (2020). Indonesian Stock Market Volatility: GARCH Model. Montenegrin Journal of Economics, 16(2), 7-17.
- Endri, E., Aipama, W., Razak, A., Sari, L., & Septiano, R. (2021). Stock price volatility during the COVID-19 pandemic: The GARCH model. Investment Management and Financial Innovations, 18(4), 12-20.
- Gadanecz, B., Miyajima, K., & Shu, C. (2018). Emerging market local currency sovereign bond yields: The role of exchange rate risk. International Review of Economics & Finance, 57, 371-401.
- Grishunin, S., Bukreeva, A., Suloeva, S., & Burova, E. (2023). Analysis of yields and their determinants in the European corporate green bond market. Risks, 11(1), Article 14.
- Kang, W., Ratti, R. A., & Yoon, K. H. (2014). The impact of oil price shocks on US bond market returns. Energy Economics, 44, 248-258.
- Kim, J.-M., Kim, D. H., & Jung, H. (2021). Estimating yield spreads volatility using GARCH-type models. The North American Journal of Economics and Finance, 57, Article 101396.
- Koroleva, E., & Kopeykin, M. (2022). Understanding of macro factors that affect yield of government bonds. Risks, 10(8), Article 166.
- Kurniasih, A., & Restika, Y. (2015). The influence of macroeconomic indicators and foreign ownership on government bond yields: A case of Indonesia. Mediterranean Journal of Social Sciences, 6(5), 39-51.
- Kuzu, M. (2020). Determinants of benchmark interest rate: Evidence form Turkish bond markets. PressAcademia, 7(4), 308-323.
- Lin, F. L., Yang, S. Y., Marsh, T., & Chen, Y. F. (2018). Stock and bond return relations and stock market uncertainty: Evidence from wavelet analysis. International Review of Economics & Finance, 55, 285-294.
- Megananda, D., Endri, E., Oemar, F., & Husna, A. (2021). Determinants of corporate bond yield: Empirical evidence from Indonesia. Journal of Asian Finance, Economics, and Business, 8(3), 1135-1142.
- Mishkin, F. S., & Eakins, S. G. (2019). Financial markets. Pearson Italia.
- Morrison, E. J. (2019). Energy price implications for emerging market bond returns. Research in International Business and Finance, 50, 398-415.
- Naidu, S. H. A., Goyari, P., & Kamaiah, B. (2016). Determinants of sovereign bond yields in emerging economies: Some panel inferences. Theoretical and Applied Economics, 23(2), 101-118.
- Narayana, I. G. N. A. A. B., & Lubis, A. W. (2023). The macroeconomics factors and the crisis-induced sentiment of fears impact on Indonesian government bond yield. Jurnal Ekonomi Kuantitatif Terapan, 16(1), 139-156.
- Nazlioglu, S., Gupta, R., & Bouri, E. (2020). Movements in international bond markets: The role of oil prices. International Review of Economics & Finance, 68, 47-58.
- Nguyen, H., Le, T., & Nguyen, P. A. (2022). The impacts of fiscal and macroeconomic factors on Vietnam government bond yield. International Journal of Economics and Finance, 14(8).
- Omodero, C. O., & Alege, P. O. (2022). Public-sector bonds and economic growth in Nigeria. Montenegrin Journal of Economics, 18(2), 95-103.
- Paul, M. T. (2018). The issues and implications about the volatility of the stock and the bond prices and their returns and the volatility of interest rates and inflation – Which are being researched in finance and macro-monetary economics literature: A survey. Applied Economics and Finance, 5(2), 125-142.
- Permanasari, I., & Kurniasih, A. (2021). Factors affecting the yield of Indonesia government bonds 10 years. European Journal of Business and Management Research, 6(1), 243-248.
- Piazzesi, M. (2005). Bond yields and the Federal Reserve. Journal of Political Economy, 113(2), 311-344.
- Pinho, A., & Barradas, R. (2021). Determinants of the Portuguese government bond yields. International Journal of Finance & Economics, 26(2), 2375-2395.
- Poghosyan, T. (2014). Long-run and short-run determinants of sovereign bond yields in advanced economies. Economic Systems, 38(1), 100-114.
- Pramana, F. W., & Nachrowi, D. N. (2016). The effect of Indonesian macroeconomic condition and international interest rate on yield of government bond in US dollar. Journal of Indonesian Applied Economics, 6(1), 44-65.
- Pratiwi, C. J., & Mustafa, M. H. (2021). The analysis the effect of macroeconomic factors on Indonesia 10-year government bond yield. Dinasti International Journal of Digital Business Management, 2(3), 471-481.
- Qisthina, G. F., Achsani, N. A., & Novianti, T. (2022). Determinants of Indonesian government bond yields. Jurnal Aplikasi Bisnis dan Manajemen (JABM), 8(1).
- Rahmatika, N. (2019). How is the shock of the macro economics variables and world oil price effected the yield of Indonesia government bond index (INDOBEXGB)? Media Ekonomi, 27(2), 141-162.
- Rosanti, A., & Sihombing, P. (2021). Determinant of Indonesian government bond yields with 1, 5, and 10 years term. International Journal of Innovative Science and Research Technology, 6(12), 1087-1095.
- Saenong, Z., Muthalib, A., Adam, B., Rumbia, W., Millia, H., & Saidi, L. O. (2020). Symmetric and asymmetric effect of crude oil prices and exchange rate on bond yields in Indonesia. International Journal of Energy Economics and Policy, 10(2), 95-100.
- Santosa, P. W. (2021). Macroeconomic indicators and yield curve of Indonesian government bond. Business, Management and Economics Engineering, 19(1), 34-48.
- Tjandrasa, B. B. (2017). The effect of consumer expectation index, economic condition index and crude oil price on Indonesian government bond yield. Journal of Economics, Business & Accountancy Ventura, 20(1), 1-12.
- Tjandrasa, B. B., Siagian, H., & Jie, F. (2020). The macroeconomic factors affecting government bond yield in Indonesia, Malaysia, Thailand, and the Philippines. Investment Management and Financial Innovations, 17(3), 111-121.
- Trinh, Q. T., Nguyen, A. P., Nguyen, H. A., & Ngo, P. T. (2020). Determinants of Vietnam government bond yield volatility: A GARCH approach. Journal of Asian Finance, Economics and Business, 7(7), 15-25.
- Utama, C., & Agesy, S. (2016). The effect of macroeconomic variables on the yield spread of Indonesian government’s bond. Journal of Indonesian Applied Economics, 6(2), 155-175.
- Varirahartia, D., & Marsoem, B. S. (2022). Effect of bonds maturity date, interest rates, inflation, exchange rates and foreign exchange reserves on yield to maturity of government bonds 2014–2020. Jurnal Syntax Admiration, 3(2), 373-387.
- Wang, P. (2009). Financial econometrics (2nd ed.). London: Routledge, Taylor & Francis Group.
- Wicaksono, B. D., & Syarif, A. D. (2022). The influence of inflation, exchange rate and foreign exchange reserves on Indonesian government bond yield with the Bank 94 Indonesia rate as moderation. Journal of Economics, Finance and Management Studies, 5(12), 3868-3876.
- Zhou, S., & McMillan, D. (rev. ed.). (2021). Macroeconomic determinants of long-term sovereign bond yields in South Africa. Cogent Economics & Finance, 9(1), Article 1929678.
-
Impact of inflation on economic growth: evidence from Nigeria
Anthony Olugbenga Adaramola ,
Oluwabunmi Dada
doi: http://dx.doi.org/10.21511/imfi.17(2).2020.01
Investment Management and Financial Innovations Volume 17, 2020 Issue #2 pp. 1-13 Views: 9152 Downloads: 5486 TO CITE АНОТАЦІЯIn an attempt to examine the influence of inflation on the growth prospects of the Nigerian economy, the study employs the autoregressive distributed lag on the selected variables, i.e. real gross domestic product (GDP), inflation rate, interest rate, exchange rate, degree of economy`s openness, money supply, and government consumption expenditures for the period 1980–2018. The study findings indicate that inflation and real exchange rate exert a significant negative impact on economic growth, while interest rate and money supply indicate a positive and significant impact on economic growth. Other variables in the model depict no influence on the economic growth of Nigeria. The causality result shows the unidirectional relationships between interest rate, exchange rate, government consumption expenditures and gross domestic product. However, inflation and the degree of openness show no causal relationship with gross domestic product. As a result, the study recommends that a more pragmatic effort is needed by the monetary authorities to target the inflation vigorously to prevent its adverse effect by ensuring a tolerable rate that would stimulate the economic growth of Nigeria.
-
Fair market value of bitcoin: halving effect
Artur Meynkhard
doi: http://dx.doi.org/10.21511/imfi.16(4).2019.07
Investment Management and Financial Innovations Volume 16, 2019 Issue #4 pp. 72-85 Views: 3876 Downloads: 1042 TO CITE АНОТАЦІЯThe purpose of this article is to analyze the effect that halving has on the fair market value of bitcoins. The main hypothesis of the study is that the decline in the cost of miners’ remuneration for mining is a significant factor that affects the price of cryptocurrencies. The article examines the factors that regulate the issuing process. The significance of a limited supply of bitcoin is detailed in the article, as well as the mechanism for the implementation of the issue of new bitcoins. The study compares the historical inflation data of the US dollar and the projected data on the inflation of bitcoin. The article analyzes the main technical element of cryptocurrency – halving – when the miner’s reward is halved. This analysis includes the mathematical methods of statistical data processing. Research results show that reducing remuneration by half every four years leads to an increased market value of the cryptocurrency. This relationship is clearly illustrated by the Kendall rank correlation method. The results of the study can have a significant impact on the fundamental assessment of bitcoin and can also enable investors to assess any of the existing and operating cryptocurrencies according to this method.
-
Factors affecting equity mutual fund performance: evidence from Indonesia
Gusni ,
Silviana ,
Faisal Hamdani
doi: http://dx.doi.org/10.21511/imfi.15(1).2018.01
Investment Management and Financial Innovations Volume 15, 2018 Issue #1 pp. 1-9 Views: 2804 Downloads: 784 TO CITE АНОТАЦІЯThe evaluation of equity mutual fund performance and identification factors that affect mutual fund performance is of great interest to an investor in Indonesia. This study investigates the performance of equity mutual fund by using risk-adjusted performance proposed by Treynor (1965) and examines factors affecting mutual fund performance by using the ability of investment manager (market timing and stock selection skill), fund size, and inflation. To achieve the objectives of this study, a total of 19 equity mutual funds was selected using purposive sampling method from the period from 2011 to 2015. A panel data analysis method has been used to analyze the effect of those factors on the equity mutual fund performance. The result showed that equity mutual fund performance tends to fluctuate in Indonesia. Equity mutual fund performance influenced by stock selection skill and inflation, meanwhile, market timing skill and fund size have no significant effect on the equity mutual fund performance.
