Estimated results using quarterly data are presented in Tables 9,101112–13. When the short-term 3-month interest rate is included with inflation and the ratio of government debt to nominal GDP, the computed F-statistic value is mostly higher than the upper bound value. Long-run coefficients of the short-term interest rate are positive when significant. The magnitude of this coefficient lies between 0.13 and 0.53. The coefficient of the ratio of government debt to nominal GDP is mostly negative and significant at the 1% level, suggesting that in the long run a higher debt ratio tends to reduce the nominal yields of IGBs. This is contrary to the conventional wisdom. Quarterly data allow the use of government fiscal variables but a clear limitation is that these results are based on a smaller number of observations.

Table 9. 
Autoregressive Distributive Lag Bounds Test Results for IGB2YR_Q (quarterly data)
Equation F-statistic 
9.1) IGB2YR_Q = γ0 + γ1TB3M_Q + γ2DRATIO_Q 2.67 
9.2) IGB2YR_Q = γ3 + γ4TCPIYOY_Q + γ5DRATIO_Q 1.68 
9.3) IGB2YR_Q = γ6 + γ7IPIYOY_Q + γ8DRATIO_Q 2.21 
9.4) IGB2YR_Q = γ9 + γ10TB3M_Q + γ11TCPIYOY_Q + γ12DRATIO_Q 1.16 
9.5) IGB2YR_Q = γ13 + γ14TB3M_Q + γ15IPIYOY_Q + γ16DRATIO_Q 2.03 
9.6) IGB2YR_Q = γ17 + γ18TB3M_Q + γ19TCPIYOY_Q + γ20IPIYOY_Q 1.01 
+ γ21DRATIO_Q  
Equation F-statistic 
9.1) IGB2YR_Q = γ0 + γ1TB3M_Q + γ2DRATIO_Q 2.67 
9.2) IGB2YR_Q = γ3 + γ4TCPIYOY_Q + γ5DRATIO_Q 1.68 
9.3) IGB2YR_Q = γ6 + γ7IPIYOY_Q + γ8DRATIO_Q 2.21 
9.4) IGB2YR_Q = γ9 + γ10TB3M_Q + γ11TCPIYOY_Q + γ12DRATIO_Q 1.16 
9.5) IGB2YR_Q = γ13 + γ14TB3M_Q + γ15IPIYOY_Q + γ16DRATIO_Q 2.03 
9.6) IGB2YR_Q = γ17 + γ18TB3M_Q + γ19TCPIYOY_Q + γ20IPIYOY_Q 1.01 
+ γ21DRATIO_Q  

DRATIO_Q = government debt as percentage of nominal gross domestic product, IGB2YR_Q = 2-year government bond yield, IPIYOY_Q = year-on-year percentage change in industrial production, TB3M_Q = 3-month government auction rate, TCPIYOY_Q = year-on-year percentage change in consumer price index.

Note: Lower bound values are 6.84, 4.94, and 4.04 for 1%, 5%, and 10% levels of significance, respectively. Upper bound values are 7.84, 5.73, and 4.78 for 1%, 5%, and 10% levels of significance, respectively.

Source: Authors’ calculations.

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Table 10. 
Autoregressive Distributive Lag Bounds Test Results for IGB3YR_Q (quarterly data)
Equation  F-statistic 
10.1) IGB3YR_Q = γ22 + γ23TB3M_Q + γ24DRATIO_Q  5.51** 
10.2) IGB3YR_Q = γ25 + γ26TCPIYOY_Q + γ27DRATIO_Q  2.19 
10.3) IGB3YR_Q = γ28 + γ29IPIYOY_Q + γ30DRATIO_Q  2.51 
10.4) IGB3YR_Q = γ31 + γ32TB3M_Q + γ33TCPIYOY_Q + γ34DRATIO_Q  6.17** 
10.5) IGB3YR_Q = γ35 + γ36TB3M_Q + γ37IPIYOY_Q + γ38DRATIO_Q  2.21 
10.6) IGB3YR_Q = γ39 + γ40TB3M_Q + γ41TCPIYOY_Q + γ42IPIYOY_Q + γ43DRATIO_Q  1.09 
Long-Run Relationships 
Variable Equation 10.1 Equation 10.4 
TB3M_Q 0.53*** 0.44*** 
 (0.07) (0.03) 
TCPIYOY_Q — 0.00 
  (0.03) 
IPIYOY_Q — — 
DRATIO_Q −2.39*** 0.69 
 (0.82) (0.61) 
Constant 7.36*** 3.21*** 
 (1.55) (0.85) 
Time period Q3 2003– Q1 2007– 
 Q2 2015 Q2 2015 
Number of observations 48 34 
Equation  F-statistic 
10.1) IGB3YR_Q = γ22 + γ23TB3M_Q + γ24DRATIO_Q  5.51** 
10.2) IGB3YR_Q = γ25 + γ26TCPIYOY_Q + γ27DRATIO_Q  2.19 
10.3) IGB3YR_Q = γ28 + γ29IPIYOY_Q + γ30DRATIO_Q  2.51 
10.4) IGB3YR_Q = γ31 + γ32TB3M_Q + γ33TCPIYOY_Q + γ34DRATIO_Q  6.17** 
10.5) IGB3YR_Q = γ35 + γ36TB3M_Q + γ37IPIYOY_Q + γ38DRATIO_Q  2.21 
10.6) IGB3YR_Q = γ39 + γ40TB3M_Q + γ41TCPIYOY_Q + γ42IPIYOY_Q + γ43DRATIO_Q  1.09 
Long-Run Relationships 
Variable Equation 10.1 Equation 10.4 
TB3M_Q 0.53*** 0.44*** 
 (0.07) (0.03) 
TCPIYOY_Q — 0.00 
  (0.03) 
IPIYOY_Q — — 
DRATIO_Q −2.39*** 0.69 
 (0.82) (0.61) 
Constant 7.36*** 3.21*** 
 (1.55) (0.85) 
Time period Q3 2003– Q1 2007– 
 Q2 2015 Q2 2015 
Number of observations 48 34 

DRATIO_Q = government debt as percentage of nominal gross domestic product, IGB3YR_Q = 3-year government bond yield, IPIYOY_Q = year-on-year percentage change in industrial production, TB3M_Q = 3-month government auction rate, TCPIYOY_Q = year-on-year percentage change in consumer price index.

Notes: *** and ** represent 1% and 5% levels of significance, respectively. Standard errors are in parentheses. Lower bound values are 5.15, 3.79, and 3.17 for 1%, 5%, and 10% levels of significance, respectively. Upper bound values are 6.36, 5.52, and 4.14 for 1%, 5%, and 10% levels of significance, respectively.

Source: Authors’ calculations.

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Table 11. 
Autoregressive Distributive Lag Bounds Test Results for IGB5YR_Q (quarterly data)
Equation   F-statistic 
11.1) IGB5YR_Q = γ44 + γ45TB3M_Q + γ46DRATIO_Q   5.13** 
11.2) IGB5YR_Q = γ47 + γ48TCPIYOY_Q + γ49DRATIO_Q   3.45 
11.3) IGB5YR_Q = γ50 + γ51IPIYOY_Q + γ52DRATIO_Q   3.81 
11.4) IGB5YR_Q = γ53 + γ54TB3M_Q + γ55TCPIYOY_Q + γ56DRATIO_Q   9.00*** 
11.5) IGB5YR_Q = γ57 + γ58TB3M_Q + γ59IPIYOY_Q + γ60DRATIO_Q   3.97 
11.6) IGB5YR_Q = γ61 + γ62TB3M_Q + γ63TCPIYOY_Q + γ64IPIYOY + γ65DRATIO_Q   6.63*** 
Long-Run Relationships 
Variable Equation 11.1 Equation 11.4 Equation 11.6 
TB3M_Q 0.41*** 0.26*** 0.21*** 
 (0.09) (0.04) (0.07) 
TCPIYOY_Q — −0.03 −0.11 
  (0.05) (0.08) 
IPIYOY_Q — — −0.03 
   (0.02) 
DRATIO_Q −3.06*** 1.54 1.67 
 (1.04) (0.92) (1.08) 
Constant 9.52*** 3.73** 4.67** 
 (1.98) (1.36) (1.83) 
Time period Q3 2003– Q1 2007– Q1 2007– 
 Q2 2015 Q2 2015 Q2 2015 
Number of observations 48 34 34 
Equation   F-statistic 
11.1) IGB5YR_Q = γ44 + γ45TB3M_Q + γ46DRATIO_Q   5.13** 
11.2) IGB5YR_Q = γ47 + γ48TCPIYOY_Q + γ49DRATIO_Q   3.45 
11.3) IGB5YR_Q = γ50 + γ51IPIYOY_Q + γ52DRATIO_Q   3.81 
11.4) IGB5YR_Q = γ53 + γ54TB3M_Q + γ55TCPIYOY_Q + γ56DRATIO_Q   9.00*** 
11.5) IGB5YR_Q = γ57 + γ58TB3M_Q + γ59IPIYOY_Q + γ60DRATIO_Q   3.97 
11.6) IGB5YR_Q = γ61 + γ62TB3M_Q + γ63TCPIYOY_Q + γ64IPIYOY + γ65DRATIO_Q   6.63*** 
Long-Run Relationships 
Variable Equation 11.1 Equation 11.4 Equation 11.6 
TB3M_Q 0.41*** 0.26*** 0.21*** 
 (0.09) (0.04) (0.07) 
TCPIYOY_Q — −0.03 −0.11 
  (0.05) (0.08) 
IPIYOY_Q — — −0.03 
   (0.02) 
DRATIO_Q −3.06*** 1.54 1.67 
 (1.04) (0.92) (1.08) 
Constant 9.52*** 3.73** 4.67** 
 (1.98) (1.36) (1.83) 
Time period Q3 2003– Q1 2007– Q1 2007– 
 Q2 2015 Q2 2015 Q2 2015 
Number of observations 48 34 34 

DRATIO_Q = government debt as percentage of nominal gross domestic product, IGB5YR_Q = 5-year government bond yield, IPIYOY_Q = year-on-year percentage change in industrial production, TB3M_Q = 3-month government auction rate, TCPIYOY_Q = year-on-year percentage change in consumer price index.

Notes: *** and ** represent 1% and 5% levels of significance, respectively. Standard errors are in parentheses. Lower bound values are 5.15, 3.79, and 3.17 for 1%, 5%, and 10% levels of significance, respectively. Upper bound values are 6.36, 5.52, and 4.14 for 1%, 5%, and 10% levels of significance, respectively.

Source: Authors’ calculations.

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Table 12. 
Autoregressive Distributive Lag Bounds Test Results for IGB7YR_Q (quarterly data)
Equation    F-statistic 
12.1) IGB7YR_Q = γ66 + γ67TB3M_Q + γ68DRATIO_Q    4.89** 
12.2) IGB7YR_Q = γ69 + γ70TCPIYOY_Q + γ71DRATIO_Q    4.50** 
12.3) IGB7YR_Q = γ72 + γ73IPIYOY_Q + γ74DRATIO_Q    4.62** 
12.4) IGB7YR_Q = γ75 + γ76TB3M_Q + γ77TCPIYOY_Q + γ78DRATIO_Q    10.04*** 
12.5) IGB7YR_Q = γ79 + γ80TB3M_Q + γ81IPIYOY_Q + γ82DRATIO_Q    3.81 
12.6) IGB7YR_Q = γ83 + γ84TB3M_Q + γ85TCPIYOY_Q + γ86IPIYOY_Q + γ87DRATIO_Q    2.44 
Long-Run Relationships 
Variable Equation 12.1 Equation 12.2 Equation 12.3 Equation 12.4 
TB3M_Q 0.35*** — — 0.18*** 
 (0.10)   (0.05) 
TCPIYOY_Q — 0.02 — −0.04 
  (0.10)  (0.05) 
IPIYOY_Q — — −0.02 — 
   (0.04)  
DRATIO_Q −3.22*** 1.67 −4.97*** 1.71* 
 (1.14) (2.16) (1.57) (0.98) 
Constant 10.40*** 5.18 15.71*** 4.27*** 
 (2.17) (3.51) (2.53) (1.43) 
Time period Q3 2003– Q1 2007– Q3 2003– Q1 2007– 
 Q2 2015 Q2 2015 Q2 2015 Q2 2015 
Number of observations 48 34 48 34 
Equation    F-statistic 
12.1) IGB7YR_Q = γ66 + γ67TB3M_Q + γ68DRATIO_Q    4.89** 
12.2) IGB7YR_Q = γ69 + γ70TCPIYOY_Q + γ71DRATIO_Q    4.50** 
12.3) IGB7YR_Q = γ72 + γ73IPIYOY_Q + γ74DRATIO_Q    4.62** 
12.4) IGB7YR_Q = γ75 + γ76TB3M_Q + γ77TCPIYOY_Q + γ78DRATIO_Q    10.04*** 
12.5) IGB7YR_Q = γ79 + γ80TB3M_Q + γ81IPIYOY_Q + γ82DRATIO_Q    3.81 
12.6) IGB7YR_Q = γ83 + γ84TB3M_Q + γ85TCPIYOY_Q + γ86IPIYOY_Q + γ87DRATIO_Q    2.44 
Long-Run Relationships 
Variable Equation 12.1 Equation 12.2 Equation 12.3 Equation 12.4 
TB3M_Q 0.35*** — — 0.18*** 
 (0.10)   (0.05) 
TCPIYOY_Q — 0.02 — −0.04 
  (0.10)  (0.05) 
IPIYOY_Q — — −0.02 — 
   (0.04)  
DRATIO_Q −3.22*** 1.67 −4.97*** 1.71* 
 (1.14) (2.16) (1.57) (0.98) 
Constant 10.40*** 5.18 15.71*** 4.27*** 
 (2.17) (3.51) (2.53) (1.43) 
Time period Q3 2003– Q1 2007– Q3 2003– Q1 2007– 
 Q2 2015 Q2 2015 Q2 2015 Q2 2015 
Number of observations 48 34 48 34 

DRATIO_Q = government debt as percentage of nominal gross domestic product, IGB7YR_Q = 7-year government bond yield, IPIYOY_Q = year-on-year percentage change in industrial production, TB3M_Q = 3-month government auction rate, TCPIYOY_Q = year-on-year percentage change in consumer price index.

Notes: *** and ** represent 1% and 5% levels of significance, respectively. Standard errors are in parentheses. Lower bound values are 5.15, 3.79, and 3.17 for 1%, 5%, and 10% levels of significance, respectively. Upper bound values are 6.36, 5.52, and 4.14 for 1%, 5%, and 10% levels of significance, respectively.

Source: Authors’ calculations.

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Table 13. 
Autoregressive Distributive Lag Bounds Test Results for IGB10YR_Q (quarterly data)
Equation    F-statistic 
13.1) IGB10YR_Q = γ88 + γ89TB3M_Q + γ90DRATIO_Q    6.82*** 
13.2) IGB10YR_Q = γ91 + γ92TCPIYOY_Q + γ93DRATIO_Q    5.51** 
13.3) IGB10YR_Q = γ94 + γ95IPIYOY_Q + γ96DRATIO_Q    7.88*** 
13.4) IGB10YR_Q = γ97 + γ98TB3M_Q + γ99TCPIYOY + γ100DRATIO_Q    10.66*** 
13.5) IGB10YR_Q = γ101 + γ102TB3M_Q + γ103IPIYOY_Q + γ104DRATIO_Q    4.14 
13.6) IGB10YR_Q = γ105 + γ106TB3M_Q + γ107TCPIYOY_Q + γ108IPIYOY_Q + γ109DRATIO_Q    3.93 
Long-Run Relationships 
Variable Equation 13.1 Equation 13.2 Equation 13.3 Equation 13.4 
TB3M_Q 0.29 — — 0.13** 
 (0.20)   (0.05) 
TCPIYOY_Q — 0.03 — −0.05 
  (0.08)  (0.06) 
IPIYOY_Q — — 0.04 — 
   (0.07)  
DRATIO_Q −5.41*** 1.53 −7.52*** 1.75* 
 (2.18) (1.78) (2.16) (1.02) 
Constant 14.67*** 5.48* 19.90*** 4.85*** 
 (4.42) (2.90) (3.56) (1.48) 
Time period Q3 1999– Q1 2007– Q3 1999– Q1 2007– 
 Q2 2015 Q2 2015 Q2 2015 Q2 2015 
Number of observations 64 34 64 34 
Equation    F-statistic 
13.1) IGB10YR_Q = γ88 + γ89TB3M_Q + γ90DRATIO_Q    6.82*** 
13.2) IGB10YR_Q = γ91 + γ92TCPIYOY_Q + γ93DRATIO_Q    5.51** 
13.3) IGB10YR_Q = γ94 + γ95IPIYOY_Q + γ96DRATIO_Q    7.88*** 
13.4) IGB10YR_Q = γ97 + γ98TB3M_Q + γ99TCPIYOY + γ100DRATIO_Q    10.66*** 
13.5) IGB10YR_Q = γ101 + γ102TB3M_Q + γ103IPIYOY_Q + γ104DRATIO_Q    4.14 
13.6) IGB10YR_Q = γ105 + γ106TB3M_Q + γ107TCPIYOY_Q + γ108IPIYOY_Q + γ109DRATIO_Q    3.93 
Long-Run Relationships 
Variable Equation 13.1 Equation 13.2 Equation 13.3 Equation 13.4 
TB3M_Q 0.29 — — 0.13** 
 (0.20)   (0.05) 
TCPIYOY_Q — 0.03 — −0.05 
  (0.08)  (0.06) 
IPIYOY_Q — — 0.04 — 
   (0.07)  
DRATIO_Q −5.41*** 1.53 −7.52*** 1.75* 
 (2.18) (1.78) (2.16) (1.02) 
Constant 14.67*** 5.48* 19.90*** 4.85*** 
 (4.42) (2.90) (3.56) (1.48) 
Time period Q3 1999– Q1 2007– Q3 1999– Q1 2007– 
 Q2 2015 Q2 2015 Q2 2015 Q2 2015 
Number of observations 64 34 64 34 

DRATIO_Q = government debt as percentage of nominal gross domestic product, IGB10YR_Q = 10-year government bond yield, IPIYOY_Q = year-on-year percentage change in industrial production, TB3M_Q = 3-month government auction rate, TCPIYOY_Q = year-on-year percentage change in consumer price index.

Notes: *** and ** represent 1% and 5% levels of significance, respectively. Standard errors are in parentheses. Lower bound values are 5.15, 3.79, and 3.17 for 1%, 5%, and 10% levels of significance, respectively. Upper bound values are 6.36, 5.52, and 4.14 for 1%, 5%, and 10% levels of significance, respectively.

Source: Authors’ calculations.

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