Effect of Macroprudential Policies on Sovereign Bond Markets: Evidence from the ASEAN-4 Countries
Publication | October 2023
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The paper investigates the effect of prudential policies on sovereign bond vulnerability to global spillover risk in ASEAN-4 countries (Indonesia, Malaysia, the Philippines, and Thailand).
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Using a risk 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. Combining with indirect effects, prudential policies reduce sovereign spillover risks in the long term. These findings suggest prudential policies have dual efficiency in sovereign risk regulation and Treasury internationalization.
Contents
- Introduction
- Vulnerability of Sovereign Bonds in ASEAN
- Effects of Prudential Policy on Connectedness
- Conclusion
- Appendix
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