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Investigating the determinants of domestic bonds: the role of socio-economic and institutional factors

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  • A. M. Khalid
  • G. Rajaguru

Abstract

This article investigates the determinants of the size of domestic bond market using economic, social and institutional factors. We expand the body of existing literature by suggesting that economic and social environment as well as institutional settings vary between developed and emerging economies. The article uses recent data from a wide range of countries, incorporates a variety of macroeconomic variables, social indicators and institutional factors to reassess the determinant of domestic bond markets. Robustness of the empirical analysis is established through both two-stage least squares and generalized method of movements techniques. The results of this article show that the size of the economy, breadth and depth of the banking system, the monetary policy stance, the degree of openness, the level of corruption, the degree of civil liberty and status of market access to investors, all play a crucial role in the determination of the size of the domestic bond market. We also find differences across developed and emerging market samples. The results are robust to different specifications and the corresponding estimation techniques.

Suggested Citation

  • A. M. Khalid & G. Rajaguru, 2018. "Investigating the determinants of domestic bonds: the role of socio-economic and institutional factors," Applied Economics, Taylor & Francis Journals, vol. 50(1), pages 35-50, January.
    • Handle: RePEc:taf:applec:v:50:y:2018:i:1:p:35-50
    DOI: 10.1080/00036846.2017.1313951
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    References listed on IDEAS

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    1. Miyajima, Ken & Mohanty, M.S. & Chan, Tracy, 2015. "Emerging market local currency bonds: Diversification and stability," Emerging Markets Review, Elsevier, vol. 22(C), pages 126-139.
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    Cited by:

    1. Jamel Boukhatem, 2021. "What drives local currency bond market development in Saudi Arabia: do macroeconomic and institutional factors matter?," Future Business Journal, Springer, vol. 7(1), pages 1-18, December.

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