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Do liquidity enhancement auctions improve the market liquidity in the JGB market?

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  • Hattori, Takahiro

Abstract

This paper firstly analyzes the Liquidity Enhancement Auction, which is a unique auction implemented in the Japanese Government Bond (JGB) markets. To improve the market liquidity in the JGB market, the Ministry of Finance, Japan (MOF) uses this auction to issue additional older bonds that lack liquidity. Our results show that this auction significantly improves the liquidity measure when the MOF uses this auction to supply older bonds. Moreover, we empirically show that this auction provides a persistent effect on the market liquidity. Our paper suggests that this unique auction could be an additional tool for non-Japanese governments to complement the market liquidity.

Suggested Citation

  • Hattori, Takahiro, 2019. "Do liquidity enhancement auctions improve the market liquidity in the JGB market?," Economics Letters, Elsevier, vol. 183(C), pages 1-1.
    • Handle: RePEc:eee:ecolet:v:183:y:2019:i:c:34
    DOI: 10.1016/j.econlet.2019.07.001
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    References listed on IDEAS

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    Cited by:

    1. Hattori, Takahiro, 2023. "The premium and settlement of CCPs during the financial crisis: Evidence from the JGB market," Journal of International Money and Finance, Elsevier, vol. 132(C).
    2. Takahiro Hattori & Shogo Takahashi, 2021. "Discriminatory versus uniform auctions:Evidence from JGB market," Discussion papers ron344, Policy Research Institute, Ministry of Finance Japan.
    3. Hattori, Takahiro, 2021. "Noise as a liquidity measure: Evidence from the JGB market," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).

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    More about this item

    Keywords

    Liquidity; Japanese Government Bond; Liquidity Enhancement Auction;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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