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Meng-wai Lee and Kim-leng Goh
''Bond Market Development in Malaysia: Possible Crowding-Out from Persistent Fiscal Deficits?''
( 2019, Vol. 39 No.3 )
In Malaysia, infrastructure financing requirements can be served through domestic bond markets, including its corporate bond markets. However, financial crises have exacted a heavy toll on government debts, which are often funded by issuance of government bonds. Persistent fiscal deficits and growing issuance of government bonds can become a double-edged sword and result in crowding-out of private bond markets. This paper represents a first attempt to analyze the potential determinants of the domestic corporate bond market in Malaysia to facilitate a closer examination of the possibility of crowding-out on the Malaysian corporate bond market. This paper finds no evidence of crowding-out effects on Malaysia's domestic corporate bond market from the country's growing government debt. Importantly, findings strongly suggest that the well-functioning Malaysian government bond market has served as a strong foundation for the growth of its domestic corporate bond market.
Keywords: Corporate bond market; crisis; government debts
JEL: E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General
H6 - National Budget, Deficit, and Debt: General
Manuscript Received : Nov 08 2018 Manuscript Accepted : Jul 23 2019

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