This study is aimed to find what causes illiquidity in the government bond markets in the East Asia and Southeast Asia. The trading volumes are used as the proxy for liquidity while seven macroeconomic variables are used as regressors. The vector error correction model (VECM) and the Autoregressive Distributed Lag (ARDL) approach are employed to examine whether the trading volumes are related to the macroeconomic variables. The results of GDP, unemployment rate and issuing size are fully consistent with the previous studies. The results for the Exports-to-GDP, GDP per capita, volatility of short-term interest rate and exchange rate differ from the previous studies. We conclude that regulation could be one of the factors that cause illiquidity.

This study is aimed to find what causes illiquidity in the government bond markets in the East Asia and Southeast Asia. The trading volumes are used as the proxy for liquidity while seven macroeconomic variables are used as regressors. The vector error correction model (VECM) and the Autoregressive Distributed Lag (ARDL) approach are employed to examine whether the trading volumes are related to the macroeconomic variables. The results of GDP, unemployment rate and issuing size are fully consistent with the previous studies. The results for the Exports-to-GDP, GDP per capita, volatility of short-term interest rate and exchange rate differ from the previous studies. We conclude that regulation could be one of the factors that cause illiquidity.

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