Abstract: This chapter identifies and analyzes the key determinants of liquidity in the Thai bond market as measured by bid-ask spreads. It draws upon the results of this analysis to suggest ways to improve liquidity in the secondary market. It also considers policy actions the government and central bank can take to ensure that these key determinants are achieved, and provides recommendations for the authorities' role in creating an environment which best facilitates a liquid secondary market. The chapter proceeds as follows. Section 8.2 gives a brief overview of the structure of the bond market in Thailand. Section 8.3 discusses how to measure and interpret bond market liquidity, in particular the use of bid-ask spreads as a proxy for market liquidity. Section 8.4 discusses the theoretical and empirical framework used in the study, and the rationale behind it. Section 8.5 summarizes the empirical results from the estimations. Section 8.6 draws implications for policy, both for the Ministry of Finance in its capacity as an issuer of bonds, as well as for the Bank of Thailand in its role in safeguarding stability in the Thai financial system.

Keywords: Thailand, bond market, bond market liquidity, bid-ask spreads, Bank of Thailand,