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Global and Regional Yield Curve Dynamics and Interactions: The Case of Some Asian Countries

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  • Byung Yoon Bae
  • Dong Heon Kim

Abstract

Since the Asian financial crisis in 1997--98, Asian countries have made continuous efforts to promote monetary and financial cooperation for developing regionally well-established bond markets. This paper empirically evaluates the developments of bond markets in the East-Asia region based on the recently developed empirical methodology of dynamic cross-country bond yield interactions. To this end, we use a two-step state space model to examine the existence of the global and regional factor and analyze the effect of both factors on four Asian countries’ yield curves. We find that both global and regional factors play an important role in explaining these countries’ yield factors, although the regional factor appears to have a smaller role than the global factor and that this result seems to be robust to different subsamples. We interpret this result as evidence on the existence of the regional commonality and on endeavors toward Asian bond markets.

Suggested Citation

  • Byung Yoon Bae & Dong Heon Kim, 2011. "Global and Regional Yield Curve Dynamics and Interactions: The Case of Some Asian Countries," International Economic Journal, Taylor & Francis Journals, vol. 25(4), pages 717-738, December.
    • Handle: RePEc:taf:intecj:v:25:y:2011:i:4:p:717-738
    DOI: 10.1080/10168737.2011.636632
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    References listed on IDEAS

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    1. Robert N McCauley & Yung-Chul Park, 2006. "Developing the bond market(s) of East Asia: global, regional or national?," BIS Papers chapters, in: Bank for International Settlements (ed.), Asian bond markets: issues and prospects, volume 30, pages 19-39, Bank for International Settlements.
    2. Chang-Jin Kim & Charles R. Nelson, 1999. "State-Space Models with Regime Switching: Classical and Gibbs-Sampling Approaches with Applications," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262112388, December.
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    Cited by:

    1. Anatoly A. Peresetsky & Ruslan I. Yakubov, 2017. "Autocorrelation in an unobservable global trend: does it help to forecast market returns?," International Journal of Computational Economics and Econometrics, Inderscience Enterprises Ltd, vol. 7(1/2), pages 152-169.
    2. Sowmya, Subramaniam & Prasanna, Krishna & Bhaduri, Saumitra, 2016. "Linkages in the term structure of interest rates across sovereign bond markets," Emerging Markets Review, Elsevier, vol. 27(C), pages 118-139.
    3. Korhonen, Iikka & Peresetsky, Anatoly, 2013. "Extracting global stochastic trend from non-synchronous data," BOFIT Discussion Papers 15/2013, Bank of Finland, Institute for Economies in Transition.
    4. Durdyev, Ruslan & Peresetsky, Anatoly, 2014. "Autocorrelation in the global stochastic trend," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 35(3), pages 39-58.
    5. Venetis, Ioannis & Ladas, Avgoustinos, 2022. "Co-movement and global factors in sovereign bond yields," MPRA Paper 115801, University Library of Munich, Germany.
    6. Cavaca, Igor Bastos & Meurer, Roberto, 2021. "International monetary policy spillovers: Linkages between U.S. and South American yield curves," International Review of Economics & Finance, Elsevier, vol. 76(C), pages 737-754.
    7. Sanjay Kumar Rout & Hrushikesh Mallick, 2022. "Sovereign Bond Market Shock Spillover Over Different Maturities: A Journey from Normal to Covid-19 Period," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 29(4), pages 697-734, December.
    8. Grigoryeva, Lyudmila & Ortega, Juan-Pablo & Peresetsky, Anatoly, 2018. "Volatility forecasting using global stochastic financial trends extracted from non-synchronous data," Econometrics and Statistics, Elsevier, vol. 5(C), pages 67-82.
    9. repec:zbw:bofitp:2013_015 is not listed on IDEAS
    10. Korhonen, Iikka & Peresetsky, Anatoly, 2013. "Extracting global stochastic trend from non-synchronous data," BOFIT Discussion Papers 15/2013, Bank of Finland Institute for Emerging Economies (BOFIT).
    11. Kocsis, Zalan & Monostori, Zoltan, 2016. "The role of country-specific fundamentals in sovereign CDS spreads: Eastern European experiences," Emerging Markets Review, Elsevier, vol. 27(C), pages 140-168.
    12. Krishna Prasanna & Subramaniam Sowmya, 2017. "Yield curve in India and its interactions with the US bond market," International Economics and Economic Policy, Springer, vol. 14(2), pages 353-375, April.

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