Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments July 8, 2021 erstellt
Description:
In March 2020, government bond markets experienced severe illiquidity. Since then, regulators debate market reforms. One way to enhance liquidity could be to let government bonds, like stocks, be traded on central exchanges. We assess this reform with price data of the U.S, U.K., German, Japanese, and Israeli government bond and stock markets. We leverage a unique institutional feature of the Israeli government bond market---that it already operates on an exchange---to test whether and by how much having an exchange affected bid-ask spreads in March 2020 via difference-in-difference analyses. Our findings suggest that spreads in government bond markets without exchanges would have been 30%-60% lower if there had been an exchange. This implies higher liquidity and provides support in favor of the market reform