Assessing the Impact of the Asian Bond Markets Initiative on Bond Market Development in Asia: Evidence from A DID Analysis

Assessing the Impact of the Asian Bond Markets Initiative on Bond Market Development in Asia: Evidence from A DID Analysis

This paper attempts to evaluate the impact of ABMI on the development of bonds markets in Asia using the difference in difference (DID) method. ASEAN+3 economies have taken a collective approach to developing and integrating a bond market on a regional platform, while Latin American economies have taken an individual approach to developing their respective bond markets to attract foreign investors, thereby competing with neighboring economies. After controlling for the major determinants of bond market development, the DID results indicate that ABMI as a regional initiative has contributed to corporate bond market development in Asia by facilitating more issuance of corporate bonds in line with the result of Mizen and Tsoukas (2014). However, ABMI has not yet mitigated currency mismatch because of the strict regulations in Asian economies on transactions in domestic currencies with and between nonresidents, and the non-internationalization policies of the region’s authorities with regard to domestic currencies.

This paper attempts to evaluate the impact of ABMI on the development of bonds markets in Asia using the difference in difference (DID) method. ASEAN+3 economies have taken a collective approach to developing and integrating a bond market on a regional platform, while Latin American economies have taken an individual approach to developing their respective bond markets to attract foreign investors, thereby competing with neighboring economies. After controlling for the major determinants of bond market development, the DID results indicate that ABMI as a regional initiative has contributed to corporate bond market development in Asia by facilitating more issuance of corporate bonds in line with the result of Mizen and Tsoukas (2014). However, ABMI has not yet mitigated currency mismatch because of the strict regulations in Asian economies on transactions in domestic currencies with and between nonresidents, and the non-internationalization policies of the region’s authorities with regard to domestic currencies.