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

Yoshihiko Tsukuda, Junji Shimada and Tatsuyoshi Miyakoshi

International Review of Economics & Finance, 2017, vol. 51, issue C, 193-213

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.

Keywords: East Asian bond markets; Bond market integration; Dynamic conditional correlation; Dynamic conditional variance decomposition; DCC-GARCH model (search for similar items in EconPapers)
JEL-codes: C58 G12 G15 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (22)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:51:y:2017:i:c:p:193-213

DOI: 10.1016/j.iref.2017.05.013

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