Network analysis of local currency Asian government bond markets: Assessments of the ABFI and the ABMI

Abstract

The purpose of this paper is to assess local currency (LCY) Asian government bond markets using network analysis during the period 2001–2017. In particular, we (i) assess how the network of the markets is connected (integrated), (ii) assess how the risks over the network diverge following a risk shock in one market, and (iii) determine under what conditions rapid reconvergence occurs. We found that the network of LCY Asian government bond markets is fully connected by the Asian Bond Fund Initiative and the Asian Bond Market Initiative, and thus, risk can reach further out faster in the web of stronger relationships in the post-2008 period. The quarantine of and assistance for risks in the center market lead to rapid reconvergence compared with other markets. These findings suggest the success of LCY Asian government bond financing promoted by ABFI and ABMI, triggering LCY Asian corporate bond financing.