Open AccessThe Determinants of Long-term Interest Rates in Eurozone: Taylor Rule and Governance Indicators
Author(s) -
İmre Ersoy,
Selen Antmen
Publication year - 2016
Publication title -
international business research
Language(s) - English
Resource type - Journals
eISSN - 1913-9012
pISSN - 1913-9004
DOI - 10.5539/ibr.v9n9p58
Subject(s) - interest rate , economics , inflation (cosmology) , corporate governance , language change , panel data , financial crisis , control variable , taylor rule , real interest rate , term (time) , rule of law , monetary economics , politics , macroeconomics , monetary policy , econometrics , finance , political science , central bank , law , statistics , art , physics , literature , mathematics , theoretical physics , quantum mechanics
This study aims to search for the determinants of long-term interest rates in the Eurozone. Panel data analysis is employed for 14 Eurozone countries for the period of 2002-2014 to analyze the determinants of long-term interest rates. This study is carried out to find out whether the Worldwide Governance Indicators (WGI), Taylor (1993) rule and also the Eurozone crisis, as a control variable, have an impact on long-term interest rates. As WGI, Voice and Accountability, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law and Control of Corruption are used. The first finding of the empirical study is that inflation gap has an impact on long-term interest rates. Another finding of the study is that Political Stability and Absence of Violence/Terrorism, Government Effectiveness and Regulatory Quality effects long-term interest rates in 14 panel cross-sections. Besides, the analysis shows that the financial crisis in Eurozone as control variable affected long-term interest rates, as would be expected.