Regulating financial markets in the face of demographic shifts: The role of labor participation and economic growth in government bond yields
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Ardhiani Fadila 
, Tatang Ary Gumanti , Julia Safitri , Eka Handriani
This work is licensed under a Creative Commons Attribution 4.0 International License.
Abstract
This study examines the influence of labor force participation and demographic dynamics on government bond yields in Indonesia, focusing on the mediating role of economic growth. Understanding these relationships is essential for maintaining market stability and informing fiscal policy in emerging markets (Pinho & Barradas, 2021). Using quarterly data (2009–2023), this study employs regression, Sobel tests, cointegration, and impulse response analysis to examine effects on one, five, and ten-year bond yields. The findings reveal that while labor participation and demographic shifts do not have direct effects, economic growth significantly mediates their impact on short-term bond yields. The cointegration results confirm the existence of long-term equilibrium relationships across all tenors. Additionally, short-term yields demonstrate higher sensitivity to macroeconomic shocks compared to medium- and long-term yields (Michelson & Stein, 2023). These results highlight the critical role of promoting stable economic growth and managing demographic risks to sustain the performance and competitiveness of government bond markets in developing economies.
Keywords: Bond Yields, Macroeconomic Factors, Labor Force Participation, Economic Growth, Old Age Dependency Ratio, Emerging Markets
Authors’ individual contribution: Conceptualization — A.F., T.A.G., J.S., and E.H.; Methodology — A.F., T.A.G., J.S., and E.H.; Investigation — A.F.; Resources — A.F.; Writing — A.F.; Supervision — T.A.G., J.S., and E.H.
Declaration of conflicting interests: The Authors declare that there is no conflict of interest.
JEL Classification: G1, J11, J210, O1, O16
Received: 23.01.2025
Revised: 21.05.2025; 22.10.2025
Accepted: 18.11.2025
Published online: 20.11.2025
How to cite this paper: Fadila, A., Gumanti, T. A., Safitri, J., & Handriani, E. (2025). Regulating financial markets in the face of demographic shifts: The role of labor participation and economic growth in government bond yields [Special issue]. Journal of Governance and Regulation, 14(4), 279–289. https://doi.org/10.22495/jgrv14i4siart5
