The Malaysian Domestic Bond Market: Growing into its Rightful Role

Meng-Wai Lee, Kim-Leng Goh and Michael Meow-Chung Yap
Additional contact information
Meng-Wai Lee: Faculty of Economics and Administration, University of Malaya, Malaysia.
Michael Meow-Chung Yap: Business School, University of Nottingham, Malaysia.

Capital Markets Review, 2019, vol. 27, issue 1, 34-52

Abstract: This paper revisits Malaysia’s past for a closer look into the interaction between its dominant banking sector and capital markets, encompassing both domestic bond and equity markets. Data beginning Q4, 1993 on the Malaysian domestic bond market are extracted from Bank for International Settlements (BIS). The sample period ends at Q4, 2011 due to a change in definition for categories of domestic debt securities by BIS. Nine possible determinants of bond market development are identified from the empirical literature. The ARDL modelling approach is used. In the absence of a long-run relationship, the analysis continues with an OLS distributed lag regression. Findings point to competition between the domestic bond market with the established banking sector and equity market, which could have hindered development of the bond market in its earlier years. Since interest rate volatility and exchange rate changes adversely impacted bond market development, credible monetary policy is necessary to support development of the Malaysian bond market. The benefits accruing from a better developed domestic bond market for raising long-term funds and providing financing for post-crisis recoveries can be seen in Malaysia’s example as a policy lesson for other emerging economies.

Keywords: Domestic bond market; determinants; debt; banking sector. (search for similar items in EconPapers)
JEL-codes: G10 H62 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.mfa.com.my/wp-content/uploads/2019/09/cmr2019_271_pp34-52.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:mfa:journl:v:27:y:2019:i:1:p:34-52

Access Statistics for this article

Capital Markets Review is currently edited by Hooy Chee Wooi

More articles in Capital Markets Review from Malaysian Finance Association
Bibliographic data for series maintained by Capital Market Review ().