A0595
Title: Global and regional factors and the term structure of interest rates: Some evidence from Asian countries
Authors: Takeshi Kobayashi - NUCB Business School (Japan) [presenting]
Abstract: Asian bond markets have rapidly progressed during the last two decades after the 1997-98 financial crisis in this region. Our approach has extended a previous global factor model to examine advanced countries and Asian countries simultaneously during 2003-2020. We use a two-step state-space model to extract the global, regional and local factors. We show that the global level factor explains on average 50\% of the variations of level factors of Asian countries. The results also demonstrate that while there is a significant regional impact on Asian countries, the degree of regional influence differs across these countries. Moreover, we investigate relationships between the macro-economic variables and global and regional factors. It contributes to the literature by examining the degree of integration between Asian and international bond markets. These findings would help bond portfolio managers to be concerned with their country allocation decision.
