Liquidity of China government bond market: Measures and Driving Forces

Gaofeng Han (), Hui Miao () and Yabin Wang ()
Additional contact information
Gaofeng Han: Hong Kong Institute for Monetary and Financial Research
Hui Miao: International Monetary Fund
Yabin Wang: Hong Kong Monetary Authority

No GRU_2020_030, GRU Working Paper Series from City University of Hong Kong, Department of Economics and Finance, Global Research Unit

Abstract: We construct a daily liquidity index of the China government bond market using transaction data from the national interbank market over the past twenty years. The index is a composite of popular price-based and quantity-based metrics of liquidity. The composite indexes, obtained by averaging across different metrics or by applying principal component analysis, both point to a better liquidity condition after 2010. Market liquidity swings appear to be highly correlated with domestic funding liquidity and financial market volatility, but display less correlation to global macrofinancial indicators. Our findings suggest that further deepening of the bond market would support domestic financial stability and monetary operations down the road.

Keywords: China government bond; Bond liquidity; Principal component analysis; Regime switching model (search for similar items in EconPapers)
JEL-codes: G12 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2020-12-07
New Economics Papers: this item is included in nep-cna
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.cb.cityu.edu.hk/ef/doc/GRU/WPS/GRU%232020-030%20Han.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:cth:wpaper:gru_2020_030

Access Statistics for this paper

More papers in GRU Working Paper Series from City University of Hong Kong, Department of Economics and Finance, Global Research Unit Contact information at EDIRC.
Bibliographic data for series maintained by GRU ( this e-mail address is bad, please contact ).