Interdependencies among Asian bond markets |
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Institution: | 1. Columbia Business School, Columbia University, 3022 Broadway, New York, NY 10027, USA;2. Department of Economics, School of Business, Economics and Law, Göteborg University, P.O. Box 640, SE 405 30 Gothenburg, Sweden |
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Abstract: | There is an ongoing intraregional attempt to develop bond markets in Asia. This is to some extent a result of the Asian financial crisis, which showed the need for well-functioning fixed income markets in the region. This paper analyzes the relationships among four Asian bond markets. Cointegration tests show that the markets exhibit strong long-term interdependencies. In addition, all markets show signs of short-run cross-dependencies in the mean. The correlations between the markets are time-varying and high, except for in short turbulent periods. The results indicate that a regional bond portfolio would allow for some level of risk diversification for investors and that policymakers need to pay attention to movements in different markets. |
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