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Structural Reforms in Government Bond Markets

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  • International Monetary Fund

Abstract

The paper documents institutional reforms that have taken place in the government debt markets of many industrial countries since the early 1980s, and investigates the impact of three key changes: (i) the move from relationship financing to market funding; (ii) the introduction of options; and (iii) the introduction of futures. Variance ratio tests on bond data for 14 industrial countries indicate that the move to market funding increased the volatility of bond yields and improved the informational efficiency of the secondary markets. The introduction of options and futures increased the informational efficiency of the underlying market, but did not have a stabilizing effect.

Suggested Citation

  • International Monetary Fund, 1998. "Structural Reforms in Government Bond Markets," IMF Working Papers 98/108, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:98/108
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    Cited by:

    1. Forssbaeck, Jens & Oxelheim, Lars, 2007. "The transition to market-based monetary policy: What can China learn from the European experience?," Journal of Asian Economics, Elsevier, vol. 18(2), pages 257-283, April.
    2. Salih N. Neftci & Andre O Santos, 2003. "Puttable and Extendible Bonds; Developing Interest Rate Derivatives for Emerging Markets," IMF Working Papers 03/201, International Monetary Fund.
    3. Claessens,Stijn & Klingebiel,Daniela M. H. & Schmukler,Sergio L., 2003. "Government bonds in domestic and foreign currency: the role of macroeconomic and institutional factors," Policy Research Working Paper Series 2986, The World Bank.

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