 On illiquidity of an emerging sovereign bond marketCenk C. Karahan and Emre Soykök Economic Systems, 2023, vol. 47, issue 2 Abstract: This study offers an analysis of a sovereign bond market in an emerging country, Turkey, and its illiquidity. We employ the Nelson-Siegel model to generate a term structure for interest rates directly from daily bond price quotes in the Turkish market. We take the noise measure, which is the byproduct of term structure estimation, as a proxy for market-wide illiquidity. Our results show that this noise measure can capture the illiquidity in the Turkish fixed-income market from global financial turbulence as well as local dynamics. Inflation uncertainty and sentiment are the major macro drivers of liquidity crunches. It has also become clear that liquidity in an emerging market such as Turkey in the aftermath of the 2008 crisis has been driven by global forces, however, since 2013 local factors have taken over. This apparent decoupling in liquidity between a major emerging market and global markets followed the approaching end of quantitative easing and a rise in economic turbulence in the country since then. Keywords: Inflation uncertainty; Interest rates; Liquidity; Sentiment; Term structure (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:47:y:2023:i:2:s093936252300002x DOI: 10.1016/j.ecosys.2023.101073 Access Statistics for this article Economic Systems is currently edited by R. Frensch More articles in Economic Systems from Elsevier Contact information at EDIRC. |
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