Bond Market Development in Malaysia: Possible Crowding-Out from Persistent Fiscal Deficits?

Meng-wai Lee (mengwailee@gmail.com) and Kim-Leng Goh
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Meng-wai Lee: Faculty of Economics and Administration, University of Malaya

Economics Bulletin, 2019, vol. 39, issue 3, 1798-1807

Abstract: In Malaysia, infrastructure financing requirements can be served through domestic bond markets, including its corporate bond markets. However, financial crises have exacted a heavy toll on government debts, which are often funded by issuance of government bonds. Persistent fiscal deficits and growing issuance of government bonds can become a double-edged sword and result in crowding-out of private bond markets. This paper represents a first attempt to analyze the potential determinants of the domestic corporate bond market in Malaysia to facilitate a closer examination of the possibility of crowding-out on the Malaysian corporate bond market. This paper finds no evidence of crowding-out effects on Malaysia's domestic corporate bond market from the country's growing government debt. Importantly, findings strongly suggest that the well-functioning Malaysian government bond market has served as a strong foundation for the growth of its domestic corporate bond market.

Keywords: Corporate bond market; crisis; government debts (search for similar items in EconPapers)
JEL-codes: E6 H6 (search for similar items in EconPapers)
Date: 2019-07-23
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Citations: View citations in EconPapers (2)

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