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    The document analyzes the determinant factors of returns on Indonesian government bonds. It examines how macroeconomic variables like the current account deficit/surplus, GDP growth, capital formation, stock prices, inflation, and exchange rates impact bond yield curves. The research methodology uses vector autoregression with impulse response functions and variance decomposition testing. The findings show that increases in capital formation, inflation, and stock prices have a positive impact on bond yields, while GDP and exchange rates have a negative effect. Variance decomposition shows that bond yields are initially 100% explained by their own variation, but external factors like investment, GDP, exchange rates, inflation, and stock prices gradually contribute more to variations in bond yields over time.

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    The document analyzes the determinant factors of returns on Indonesian government bonds. It examines how macroeconomic variables like the current account deficit/surplus, GDP growth, capital formation, stock prices, inflation, and exchange rates impact bond yield curves. The research methodology uses vector autoregression with impulse response functions and variance decomposition testing. The findings show that increases in capital formation, inflation, and stock prices have a positive impact on bond yields, while GDP and exchange rates have a negative effect. Variance decomposition shows that bond yields are initially 100% explained by their own variation, but external factors like investment, GDP, exchange rates, inflation, and stock prices gradually contribute more to variations in bond yields over time.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    22 views2 pages

    Determinant Factors of Indonesian Govt Bond Returns

    Uploaded by

    debby pratiwi
    The document analyzes the determinant factors of returns on Indonesian government bonds. It examines how macroeconomic variables like the current account deficit/surplus, GDP growth, capital formation, stock prices, inflation, and exchange rates impact bond yield curves. The research methodology uses vector autoregression with impulse response functions and variance decomposition testing. The findings show that increases in capital formation, inflation, and stock prices have a positive impact on bond yields, while GDP and exchange rates have a negative effect. Variance decomposition shows that bond yields are initially 100% explained by their own variation, but external factors like investment, GDP, exchange rates, inflation, and stock prices gradually contribute more to variations in bond yields over time.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    of 2

    The Determinant Factors of Indonesian Government Bond Returns

    Debby Augustine Pratiwi

    Trisakti University, August 2017

    ABSTRACT

    The problem of this research was the dynamics of economic conditions in Indonesia have
    linkages among macro indicators which could be a major consideration for investors in
    determining the rate of return. Therefore, macroeconomic aspects including surplus / current
    account deficit and internal sector (Monetary & Fiscal) play an important role to predict the
    real value of cash flows from the bonds as reflected by rate of return.

    The objective of this research was to examine further about the impact of current account
    deficit / surplus, GDP growth rate, gross capital formation, Composite Stock Price Index
    (IHSG), inflation, and rupiah exchange rate against yield curve of government bonds in
    Indonesia.

    The methodology of this research was Vector Auto Regression through Impulse Response
    Function (IRF) and Variance Decomposition (VD) testing

    Finding and contribution in this research was shock or values change of the gross capital
    formation, inflation, and Composite Stock Price Index had a positive impact on yield curve of
    government bonds in Indonesia while GDP and exchange rate responded negatively by yield
    curve of government bonds in Indonesia. Variations in the formation of government bond
    yields show that in the first period the largest contribution is derived from the variable
    information itself that is 100%. However, the second period until the end of the contribution
    resulting from the bond yield information gradually decreased with 59% variants while the
    remaining 11% came from investment contribution, 12% of GDP, 15% of exchange rate, 2%
    of inflation while the rest were IHSG.

    Research implication in this research should be used in analyzing of bond yield levels with
    different viewpoints that focus on economic variables. for policy makers, it could be in
    formulating policies, both monetary and fiscal policies that focus on stabilizing economic
    condition in which the investor’s trust become gaining related to level of risk of Indonesian
    government bonds

    Key Words : Current Account Deficit / Surplus, GDP Growth Rate, Gross Capital Formation,
    Composite Stock Price Index (IHSG), Inflation, And Rupiah Exchange Rate
    ,Yield Curve of Government Bonds in Indonesia.
    1. Introduction
    Developing a government securities market is a complex undertaking that depends on the
    financial and market system development of each country. As an emerging country,
    Indonesia has issued several government bonds which one of the solution of current account
    deficit. According to Government Debt Profile, issued by ministry of finance in 2016, debt
    instrument has a portion of 70% (seventy percent) from the total of state budget while the
    rest comes from external loan from World Bank, Asian Development Bank. This policy also
    overcome to support repayment of debt owned by government.

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