Dynamic Sources Of Sovereign Bond Market Liquidity

In this paper, using 482 US Dollar and Euro denominated bonds issued by 72 sovereigns, the authors examine the market and macroeconomic sources of time-series and cross sectional variation in the liquidity of the sovereign bond market in the last decade. Vector autoregression analysis show that macroeconomic fundamentals and the market variables play a substantial role in underlying the movements of liquidity throughout the whole sample period while their effects are stronger during the current financial crisis.