TY  - JOUR
AU  - Eichengreen, Barry
AU  - Luengnaruemitchai, Pipat
TI  - Bond Markets as Conduits for Capital Flows: How Does Asia Compare?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12408
PY  - 2006
Y2  - August 2006
DO  - 10.3386/w12408
UR  - http://www.nber.org/papers/w12408
L1  - http://www.nber.org/papers/w12408.pdf
N1  - Author contact info:
Barry Eichengreen
Department of Economics
University of California, Berkeley
549 Evans Hall 3880
Berkeley, CA 94720-3880
Tel: 510/642-2772
Fax: 510/643-0926
E-Mail: eichengr@econ.Berkeley.edu

Pipat Luengnaruemitchai
Phatra Securities
Bangkok 10310, Thailand
E-Mail: LPIPAT@gmail.com
M1  - published as Barry Eichengreen, Pipat Luengnaruemitchai. "Bond Markets as Conduits for Capital Flows: How Does Asia Compare?," in Takatoshi Ito and Andrew K. Rose, editors, "International Financial Issues in the Pacific Rim: Global Imbalances, Financial Liberalization, and Exchange Rate Policy" University of Chicago Press (2008)

AB  - We use data on the extent to which residents of one country hold the bonds of issuers resident in another as a measure of financial integration or interrelatedness, asking how Asia compares with Europe and Latin America and with the base case in which the purchaser and issuer of the bonds reside in different regions.  Not surprisingly, we find that Europe is head and shoulders above other regions in terms of financial integration.  More interesting is that Asia already seems to have made some progress on this front compared to Latin America and other parts of the world.  The contrast with Latin America is largely explained by stronger creditor and investor rights, more expeditious and less costly contract enforcement, and greater transparency that lead to larger and better developed financial systems in Asia, something that is conducive to foreign participation in local markets and to intra-regional cross holdings of Asian bonds generally.  Further results based on a limited sample suggest that one factor holding back investment in foreign bonds in East Asia may be limited geographical diversification by mutual funds, in turn reflecting a dearth of appropriate assets.  Asian Bond Fund 2, by creating a passively managed portfolio of local currency bonds potentially attractive to mutual fund managers and investors, may help to relax this constraint.
ER  -