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Developing Local Currency Bond Markets in Asia

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  • Park, Cyn-Young

    (Asian Development Bank)

Abstract

Local currency bond markets in emerging Asian economies have expanded dramatically since governments took steps to end the currency and maturity mismatches that savaged borrowers in the region’s financial crisis nearly 20 years ago. Encouraged in part by regional cooperation programs such as the Asian Bond Markets Initiative, the value of local currency government and corporate bond sales has grown fourfold in the past decade, helping to fund much-needed infrastructure development and protect businesses from global financial shocks. However, much more needs to be done to strengthen market infrastructure and institutions, address inconsistent policies and regulations, and enhance corporate governance. This paper presents evidence that better macroeconomic performance and stronger institutions help develop larger local currency bond markets and also create conditions for the growth in local currency sales of corporate debt and bonds with longer maturities. Regional integration can be stepped up to support the key determinants for developing efficient local currency bond markets in emerging Asia.

Suggested Citation

  • Park, Cyn-Young, 2016. "Developing Local Currency Bond Markets in Asia," ADB Economics Working Paper Series 495, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0495
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    References listed on IDEAS

    as
    1. John D. Burger & Francis E. Warnock, 2006. "Local Currency Bond Markets," IMF Staff Papers, Palgrave Macmillan, vol. 53(si), pages 1-7.
    2. Bank for International Settlements, 1999. "Market Liquidity: Research Findings and Selected Policy Implications," CGFS Papers, Bank for International Settlements, number 11, October –.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Kowalewski, Oskar & Pisany, Paweł, 2019. "What drove the growth of the corporate bond markets in Asia?," Research in International Business and Finance, Elsevier, vol. 48(C), pages 365-380.
    2. Liu Kerry, 2023. "The Effects of Foreign Participation on Chinese Government Bond Yields," Folia Oeconomica Stetinensia, Sciendo, vol. 23(2), pages 222-240, December.
    3. Jamel Boukhatem & Zied Ftiti & Jean Michel Sahut, 2021. "Bond market and macroeconomic stability in East Asia: a nonlinear causality analysis," Annals of Operations Research, Springer, vol. 297(1), pages 53-76, February.
    4. Uddin, Gazi Salah & Yahya, Muhammad & Park, Donghyun & Hedström, Axel & Tian, Shu, 2024. "Bond market spillover networks of ASEAN-4 markets: Is the global pandemic different?," International Review of Economics & Finance, Elsevier, vol. 92(C), pages 1028-1044.
    5. Donghyun Park & Kwanho Shin & Shu Tian, 2018. "Do Local Currency Bond Markets Enhance Financial Stability?," Working Papers id:12941, eSocialSciences.
    6. Olfa Berrich & Halim Dabbou & Mohamed Imen Gallali, 2022. "Over-the-counter market and corporate bond market development," International Journal of Entrepreneurship and Small Business, Inderscience Enterprises Ltd, vol. 47(2/3), pages 284-304.
    7. Ho, Edmund Ho Cheung, 2022. "Foreign participation in local currency government bond markets in emerging Asia: Benefits and pitfalls to market stability," Journal of International Money and Finance, Elsevier, vol. 128(C).
    8. Ansgar Belke & Irina Dubova & Ulrich Volz, 2017. "Bond Yield Spillovers from Major Advanced Economies to Emerging Asia," ROME Working Papers 201702, ROME Network.
    9. Shimada, Junji & Tsukuda, Yoshihiko & Miyakoshi, Tatsuyoshi, 2021. "Who is the center of local currency Asian government bond markets?," Japan and the World Economy, Elsevier, vol. 59(C).
    10. Fernández Tucci, Candelaria, 2023. "Original sin and South-South cooperation: Insights for the Mercosur from the experience of the Asian Bond Market Initiative," IPE Working Papers 214/2023, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    11. Qureshi, Fiza & Kutan, Ali M. & Ghafoor, Abdul & Hussain Khan, Habib & Qureshi, Zeeshan, 2019. "Dynamics of mutual funds and stock markets in Asian developing economies," Journal of Asian Economics, Elsevier, vol. 65(C).
    12. David Gabauer & Sowmya Subramaniam & Rangan Gupta, 2022. "On the transmission mechanism of Asia‐Pacific yield curve characteristics," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 473-488, January.
    13. Satoshi Shimizu, 2018. "Development of Asian Bond Markets and Challenges: Keys to Market Expansion," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 14(5), pages 955-1000, September.

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    More about this item

    Keywords

    bond market; financial integration; local currency bonds;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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