Endnotes

¹For the purposes of this paper, I consider the “region” as the ASEAN+3 group unless constrained otherwise by data availability.

²Of course, the existence of local currency bond markets is a necessary, but not sufficient, condition for avoiding currency mismatch, as firms may choose not to issue in their local currencies anyway (as many firms did in the current crisis in Eastern Europe). However, improved terms for borrowing in local are likely to decrease the severity of currency mismatch exposure, holding all else equal.

³The rating agencies in question in the study were Korea Investors Service (KIS) and Korea Artings Corp. (KR), which have been subsidiaries of Moody's and Fitch respectively since 2001, and national Information & Credit Evaluation, Inc.(NICE), which is a rating agency with solely Korean ownership.

⁴To the extent that a bailout of a defaulting euro area member carried positive probability, we would expect convergence in perceived default risk as well. This suggests that not all of the changes in spreads can be ascribed to convergence due to greater liquidity in these markets. Nevertheless, the evidence of decreases in the prevalence of yield curve anomalies provides an independent indication of increased liquidity in these markets subsequent to the advent of the euro.

⁵Each yield curve in Figure 2, and in the other curve displayed in this paper as well, contains all of the maturities listed on the x axis. The 2003 curve does not extend beyond the 10 year maturity.

⁶Each yield curve in Figure 2, and in the other curve displayed in this paper as well, contains all of the maturities listed on the x axis. The 2003 curve does not extend beyond the 10 year maturity.

⁷Joint ministerial statement of the ASEAN + 3 Finance Ministers Meeting, August 7, 2003, Available: http://www.mof.go.jp/english/if/as3_030807e_01.htm.

⁸Japan International Cooperation Agency (2004).

⁹The 11 nations in the EMEAP include Australia; the People's Republic of China; Hong Kong, China; Indonesia; Japan; the Republic of Korea; Malaysia; New Zealand; the Philippines; Singapore; and Thailand.

¹⁰At the outset, one recognizes a flaw in this argument. The positive imbalances enjoyed by Asian nations as a group in trade requires lending to deficit regions of the world, particularly the United States. Still, the argument could be extended to claim that in the event that more of its capital was recycled internally, global imbalances could be mitigated.

¹¹The figures for holdings of assets within the country group do not include national holdings of securities issued in their home country.

¹²Longer-term yields were actually higher in Indonesia.

¹³Of course, the movement in yields is not only attributable to the changes in liquidity in these markets and the appetites for these types of paper, but also to the unprecedented steps taken by central banks over the period to ensure adequate liquidity levels and stimulate their economies.

¹⁴While Eichengreen (2007) argues that the current crisis discredited the “spare tire” argument once and for all, there were a number of participants at the ADBI conference, including Alicia Garcia-Herrero and Masahiro Kawai, who argued that bond markets exhibited surprising resilience during the most turbulent periods.

¹⁵At that size, Batten and Szilagyi (2007) note that the Arirang market was still only 1.7% of Korea's corporate bond issuance.

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