Keywords
fiscal déficit
inflation
interest rate
sovereign risk
GDP per capita
How to Cite
Abstract
The objective of this article is to identify the main determinants of long-term sovereign bond yields, incorporating variables from both Keynesian and neoclassical frameworks. A fixed-effects panel data model is implemented, as well as grouped regressions for a sample of 30 emerging and developed countries over the period 2000–2022. The explanatory variables analyzed are public debt, fiscal deficit, inflation, short-term interest rate, exchange rate, and GDP per capita, as well as dummy variables created for the year of the Great Reccession (2009) and fort he year 2020 (COVID-19). The results show that public debt, interest rates, exchange rates and the variable created for 2009 have positive effects on returns in all models, which register higher values in exchange rates and the variable created for the year of the Great Recession. Regarding the fiscal deficit and the consumer price index, the values change from negative to positive in those models that consider a lag in inflation, with higher coefficients in the inflation variable itself. Similarly, concerning GDP per capita and the variable created for 2020 (COVID-19), the results show that there is a positive relationship in those models that do not consider lags, with coefficients that become negative in models that consider these lags in inflation. The study provides useful empirical evidence for economic and public policy makers and investors by offering information and tools for evidence-based decision-making.
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