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http://dx.doi.org/10.13106/jafeb.2020.vol7.no7.015

Determinants of Vietnam Government Bond Yield Volatility: A GARCH Approach  

TRINH, Quoc Trung (University of Economics and Law)
NGUYEN, Anh Phong (Faculty of Finance and Banking, University of Economics and Law)
NGUYEN, Hoang Anh (Faculty of Finance and Banking, University of Economics and Law)
NGO, Phu Thanh (Faculty of Finance and Banking, University of Economics and Law)
Publication Information
The Journal of Asian Finance, Economics and Business / v.7, no.7, 2020 , pp. 15-25 More about this Journal
Abstract
This empirical research aims to identify the relationship between fiscal and financial macroeconomic fundamentals and the volatility of government bonds' borrowing cost in an emerging country - Vietnam. The study covers the period from July 2006 to December 2019 and it is based on a sample of 1-year, 3-year, and 5-year government bonds, which represent short-term, medium-term and long-term sovereign bonds in Vietnam, respectively. The Generalized AutoRegressive Conditional Heteroskedasticity (GARCH) model and its derivatives such as EGARCH and TGARCH are applied on monthly dataset to examine and suggest a significant effect of fiscal and financial determinants of bond yield volatility. The findings of this study indicate that the variation of Vietnam government bond yields is in compliance with the theories of term structure of interest rate. The results also show that a proportion of the variation in the yields on Vietnam government bonds is attributed to the interest rate itself in the previous period, base rate, foreign interest rate, return of the stock market, fiscal deficit, public debt, and current account balance. Our results could be helpful in the macroeconomic policy formulation for policy-makers and in the investment practice for investors regarding the prediction of bond yield volatility.
Keywords
Emerging Markets; Vietnam Government Bonds; Bond Yield Volatility; Macroecomic Factors; GARCH;
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Times Cited By KSCI : 4  (Citation Analysis)
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