Effect of Macroprudential Policies on Sovereign Bond Markets: Evidence from the ASEAN-4 Countries

Joshua Aizenman (), Gazi Uddin, Tianqi Luo (), Ranadeva Jayasekera () and Donghyun Park
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Joshua Aizenman: University of Southern California
Tianqi Luo: Trinity College Dublin
Ranadeva Jayasekera: Trinity College Dublin

No 696, ADB Economics Working Paper Series from Asian Development Bank

Abstract: This paper examines whether prudential policies help to reduce sovereign bond vulnerability to global spillover risk in ASEAN-4 countries (Indonesia, Malaysia, the Philippines, and Thailand). We measure sovereign vulnerability within a risk connectedness network among sovereign bonds. The direct effect is that markets with tighter prudential policies have significantly smaller spillovers from the Treasury yield shocks of other regional and global economies. The sum of indirect and direct effects indicates that prudential policies reduce sovereign spillover risk in the long term. These findings suggest prudential policies have dual efficiency in sovereign risk regulation and Treasury internationalization

Keywords: sovereign bond; prudential policy; risk networks; connectedness; ASEAN (search for similar items in EconPapers)
JEL-codes: E52 E58 F42 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2023-10-10
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-ifn, nep-net, nep-opm and nep-sea
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Working Paper: Effect of Macroprudential Policies on Sovereign Bond Markets: Evidence from the ASEAN-4 Countries (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:adbewp:0696

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