The Macrodynamics of Indian Rupee Swap Yields

Authors

Tanweer Akram, Citibank
Khawaja Mamun, Sacred Heart UniversityFollow

Document Type

Article

Publication Date

6-2023

Abstract

This paper econometrically models the dynamics of Indian rupee (INR) swap yields based on key macroeconomic factors using the autoregressive distributive lag (ARDL) approach. It examines whether the short-term interest rate has a decisive influence on long-term INR swap yields after controlling for other factors, such as core inflation, the growth of industrial production, the logarithm of the equity price index, and the logarithm of the INR exchange rate. The estimated models show that the short-term interest rate has an important influence on the swap yields. This implies that the Reserve Bank of India (RBI) can sway borrowing and lending rates not just on Indian government bonds but also INR-denominated private-market financial instruments, such as swaps and swaptions.

Comments

JEL CLASSIFICATIONS: E43; E50; E58; E60; G10; G12

Working Paper No. 1020, downloaded from the Levy Economics Institute of Bard College. The Levy Economics Institute Working Paper Collection presents research in progress by Levy Institute scholars and conference participants. The purpose of the series is to disseminate ideas to and elicit comments from academics and professionals.

The dataset used in the empirical part of this paper is available to researchers for the replication and verification of the results.

Recommended Citation

Akram, T., & Mamun, K. (2023). The macrodynamics of Indian rupee swap yields (Levy Economics Institute working papers, No. 1020). https://www.levyinstitute.org/publications/the-macrodynamics-of-indian-rupee-swap-yields

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