Market Liquidity and Systemic Risk in Government Bond Markets: A Network Analysis and Agent-Based Model Approach

Toshiyuki Sakiyama and Tetsuya Yamada
Additional contact information
Toshiyuki Sakiyama: Deputy Director, Economic and Financial Studies Division, Institute for Monetary and Economic Studies (currently Financial Markets Department), Bank of Japan (E-mail: toshiyuki.sakiyama@boj.or.jp)
Tetsuya Yamada: Director, Economic and Financial Studies Division, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: tetsuya.yamada@boj.or.jp)

No 16-E-13, IMES Discussion Paper Series from Institute for Monetary and Economic Studies, Bank of Japan

Abstract: Recently, market liquidity in government bond markets has been attracting attention by market participants and central bankers since interest rate spikes have become frequent under unconventional monetary easing. We analyze network structures in the JGB (Japanese government bond) market using daily data from the BOJ-NET (the Bank of Japan Financial Network System). To our knowledge, this is the first network analysis on the government bond market. We studies how QQE (quantitative and qualitative monetary easing) has affected JGB market structure. We also conduct event studies for the spikes in interest rates (the shock after the introduction of QQE and the so-called VaR [Value at Risk] shock in 2003). In addition, we propose an agent-based model that accounts for the findings of the above event studies, and show that not only the capital adequacy of market participants but also the network structure are important for financial market stability.

Keywords: Market Liquidity; Government bond markets; Quantitative and Qualitative Easing; Network analysis; Systemic risk; Agent-based model (search for similar items in EconPapers)
JEL-codes: C58 G12 G18 (search for similar items in EconPapers)
Date: 2016-10
New Economics Papers: this item is included in nep-cba, nep-cmp and nep-fmk
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.imes.boj.or.jp/research/papers/english/16-E-13.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ime:imedps:16-e-13

Access Statistics for this paper

More papers in IMES Discussion Paper Series from Institute for Monetary and Economic Studies, Bank of Japan Contact information at EDIRC.
Bibliographic data for series maintained by Kinken ().