Ebbs and flows: the determinants of local currency bond market liquidity in Poland

Piotr Bartkiewicz

Macroeconomics and Finance in Emerging Market Economies, 2021, vol. 14, issue 2, 200-218

Abstract: Liquidity facilitates price discovery, improves market efficiency and lowers transaction costs. We make use of a novel dataset of daily bond fixings on Warsaw Stock Exchange’s official bond trading platform (2005–2018 period). Using bid-ask spreads as a proxy for market liquidity, we investigate its determinants in Poland. We find that liquidity tends to fluctuate, but has generally increased. There is robust evidence of seasonal effects, differences between security types as well as maturity and coupon size impacts. In addition, liquidity is found to be highly correlated with global factors. Findings are relevant for policymakers, public debt management and financial stability.

Date: 2021
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DOI: 10.1080/17520843.2020.1790626

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