Introduction of Bond Market: Would it be a possible Solution for Bangladesh?

Md. Nafizur Rahman, Nowshin Nower, Syed Mahdee Abbas, Abdullah Hill Nahian and Md. Raqibul Hasan Tushar

MPRA Paper from University Library of Munich, Germany

Abstract: This study aims at investigating the prospects of a bond market in Bangladesh. Most of the developed and developing economies have an active and successful bond market. But Bangladesh despite being one of the fastest-growing economies, does not have an active bond market. Hence, this study was designed to investigate the impact of a bond market on the economic growth of Asian countries and what are the prospects and challenges in Bangladesh. To investigate the benefits of a bond market in Bangladesh, this study examined the relationship between bond market return and economic growth of 4 Asian economies which included, India, Indonesia, Hong Kong, and Japan. The average annual yield of 10-year bonds was used as the independent variable and the annual GDP growth rate of these countries was used as the dependent variable in the econometric model. Data for the last 20 years from 2000 to 2019 were used for all the variables. The Unit Root Test showed that 3 variables were stationary at first difference and the other five variables were stationary at level. The Johansen Co-integration test identified the long-run association among the variables indicating the long-run relationship between bond market return and economic growth. Granger Causality revealed a bi-directional relationship for India; unidirectional relationship for Indonesia (Bond→GDP growth) and Japan (GDP Growth→Bond); and no unidirectional or bidirectional relationship among the bond market return and economic growth of Hong Kong. The various new projects, the overextension of the banking sector, and perhaps the overall good condition of the economy has created the perfect situation to develop a bond market in Bangladesh. As there are conditions that provide advantages in bond market creation, there are also various challenges that the government must overcome. Some of the most important challenges to clear up are the underdeveloped tax system, the illiquid or absent secondary market, the alternative source of debt, and the overall lack of investors. Considering the various developed bond markets these policy implications could seriously aid the development process.

Keywords: GDP growth; Johansen Co integration Test; Granger Causality; Bond Market (search for similar items in EconPapers)
JEL-codes: G1 G15 G2 O4 (search for similar items in EconPapers)
Date: 2020-05
New Economics Papers: this item is included in nep-fdg and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/101159/1/MPRA_paper_101159.pdf original version (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:pra:mprapa:101159

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().