The Threat of Financial Contagion to Emerging Asia's Local Bond Markets: Spillovers from Global Crises
Azis, Iwan J.; Mitra, Sabyasachi; Baluga, Anthony; Dime, Roselle | January 2013
Abstract
This paper employs multivariate Generalized Autoregressive Conditional
Heteroskedastic (GARCH) models with a Baba-Engle-Kraft-Kroner (BEKK) specification
to show significant shock and volatility spillovers from mature bond markets into select
emerging Asian local currency bond markets. Results reveal that while the growth of
individual bond markets in recent years has been impressive, the threat of financial
contagion to emerging Asian bond markets from shock and volatility spillovers in mature
markets is real. Although emerging Asian local bond market volatilities are more
determined by their own respective shocks and volatilities, in some markets the direct
shock and volatility spillovers remain significant. An extended analysis also shows
indirect spillovers within domestic asset markets and across economies. The results
have important implications for the monitoring and coordination of policies, not just within
national jurisdictions but also in regional and global settings, in order to maintain
financial stability.
Citation
Azis, Iwan J.; Mitra, Sabyasachi; Baluga, Anthony; Dime, Roselle. 2013. The Threat of Financial Contagion to Emerging Asia's Local Bond Markets: Spillovers from Global Crises. © Asian Development Bank. http://hdl.handle.net/11540/2334. License: CC BY 3.0 IGO.Keywords
Asian Development Bank
Development
Regional Economic Integration
Financial Sector Policies
Financial Risk Management
Bond Financing
Economic integration
Development Bank
Capital Market
Regional Plans
Regional Development Bank
Development finance
Development Banks
Local government bonds
Bonds
Catastrophe bonds
Bond funds
Bond market
Multilateral development banks
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