Bond market integration in East Asia: Multivariate GARCH with dynamic conditional correlations approach

Yoshihiko Tsukuda, Junji Shimada, Tatsuyoshi Miyakoshi

Research output: Contribution to journalArticle

13 Citations (Scopus)

Abstract

This paper examines the degree of integration between East Asian bond markets and intraregional cross-border bond markets, the Japanese bond market and the US(global) bond market. A DCC-GARCH model and a dynamic conditional variance decomposition method are applied to the local currency weekly government bond yields of eight East Asian markets over the period January 1, 2001 to December 31, 2012. We find low levels of integration between the local bond markets in the ASEAN4 (Indonesia, Malaysia, the Philippines, and Thailand) and the external markets in terms of both dynamic conditional correlations and dynamic conditional variance decompositions. There has been no upward trend in these two measures of integration for emerging East Asian countries. However, Hong Kong and Singapore are highly integrated with the external markets. In particular, they are more integrated with the US market than with the intraregional cross-border bond markets. The Japanese market has minimal effects on the East Asian markets.

Original languageEnglish
Pages (from-to)193-213
Number of pages21
JournalInternational Review of Economics and Finance
Volume51
DOIs
Publication statusPublished - 2017 Sep

Keywords

  • Bond market integration
  • DCC-GARCH model
  • Dynamic conditional correlation
  • Dynamic conditional variance decomposition
  • East Asian bond markets

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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