Developing Bond Markets for Sustainable Growth of East Asia

Abstract

Though corporate bond markets can play important roles for

East Asia's sustainable growth, it is very difficult to build a

well-functioning corporate bond market. One of the reasons for

the difficulty is that the hurdles to be overcome are closely

related each other, resulting in a chicken or egg problem. This

paper shows that the chicken or egg problem may come from

externalities in corporate bond markets and analyzes the

interaction of the externalities: dynamic externality and static

network externality. Some policy implications are drawn from

the results.