Options for developing bond markets: lessons from Asia for Central and Eastern Europe

Abstract

Asian efforts towards bond market development are driven by the 1997-98 financial crises; Central and Eastern European efforts by the transition towards EMU. The small size of most of the economies underlying these still emerging bond markets poses the question of minimum efficient scale and which options to pursue. We argue that the joint bond funds and regional bond market linkups that follow existing trade, FDI and bank ties will broaden the sources of finance, can improve market discipline, provide signals to the market, and thus increase financial stability. Based upon bond market data and analysis of regional efforts like the Asian Bond Funds, we argue that bond market development should be given more attention to foster growth and stability.