Market Liquidity: Research Findings and Selected Policy Implications
CGFS Publications No 11
May 1999
ABSTRACT
This report is the result of a coordinated research effort by the central banks
of Canada, Italy, Japan, the United Kingdom and the United States and the Bank
for International Settlements on the determinants of market liquidity and on
how central banks and other public authorities influence these determinants.
Following a decision by the Euro-currency Standing Committee (now the Committee
on the Global Financial System) in December 1997, a group of central bank
economists and market analysts, under the chairmanship of the Bank of Japan,
conducted this research from February 1998 to March 1999. As part of the study,
staff from the central banks and/or government debt offices of all of the G-10
countries participated in a survey on the structure of government securities
markets. The report consists of an overview note (Part 1) and eighteen
individual papers on various aspects of market liquidity (Part 2). The overview
note is the result of extensive discussions among the members of the study
group, taking into account insights obtained from the individual papers. An
appendix to Part 1 summarises the results of the government securities market
survey. The individual papers provide the theoretical and empirical bases for
the discussions of the study group.
Part 1.
Part 2. Individual papers
1. Conceptual Studies of Market Liquidity
Dupont, D. : The Effects of Transaction Costs on Depth
and Spread.(PDF, 9 pages, 133639 bytes)
Gravelle, T. : The Market Microstructure of Dealership Equity and Government Securities
Markets: How They Differ. (PDF, 18 pages, 128338 bytes) Muranaga, J. and Shimizu, T. : Market Microstructure and
Market Liquidity. (PDF, 29 pages, 287062 bytes)
Ui, T. : Transparency and Liquidity in Securities Markets.(PDF,
18 pages, 144241 bytes)
2. Empirical Studies of Market Liquidity
2.1 Comparative studies
Fung, B.S.C., Mitnick, S. and Remolona, E. : Inflation
Expectations and Risks in a Two-Country Affine-Yield Model. (PDF, 25
pages, 174570 bytes)
Gravelle, T. : Liquidity of the Government of Canada
Securities Market: Stylised Facts and Some Market Microstructure Comparisons to
the United States Treasury Market. (PDF, 38 pages, 408570 bytes)
Inoue, H. : The Structure of Government Securities
Markets in G10 Countries: Summary of Questionnaire Results. (PDF, 22
pages, 193371 bytes)
Inoue, H. : The Stylised Facts of Price Discovery in
Government Securities Markets: A Comparative Study. (PDF, 35 pages,
462886 bytes)
McCauley, R.N. : The Euro and the Liquidity of European
Fixed Income Markets. (PDF, 28 pages, 162597 bytes)
2.2 Country-level studies
Clare, A., Johnson, M., Proudman, J. and Saporta, V. : The
Impact of UK Macroeconomic Announcements on the Market for Gilts. (PDF,
17 pages, 153672 bytes)
Fleming, M. and Sarkar, A. : Liquidity in U.S. Treasury
Spot and Futures Markets. (PDF, 15 pages, 91133 bytes)
Higo, H. : The Change of Liquidity in the Life Cycle of
Japanese Government Securities. (PDF, 22 pages, 178355 bytes)
Muranaga, J. : Dynamics of Market Liquidity of Japanese
Stocks: An Analysis of Tick-by-Tick Data of the Tokyo Stock Exchange. (PDF,
26 pages, 328695 bytes)
Scalia, A. and Vacca, V. : Does Market Transparency
Matter? A Case Study. (PDF, 28 pages, 610089 bytes)
3. Market Operations and Market Liquidity
Cohen, B. : Monetary Policy Procedures and Volatility
Transmission along the Yield Curve. (PDF, 23 pages, 168781 bytes)
Inoue, H. : The Effects of Open Market Operations on the
Price Discovery Process in the Japanese Government Securities Market: An
Empirical Study. (PDF, 22 pages, 188324 bytes)
4. Market Liquidity under Stress
Miyanoya, A. : Price Discovery Functions in Japan's
corporate bond market: An Event Study of the Recent Fall 1997 Financial Crisis. (PDF, 30 pages, 916594 bytes)
Muranaga, J. and Shimizu, T. : Expectations and Market
Microstructure When Liquidity is Lost. (PDF, 15 pages, 555955 bytes)
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