The study uses SADF and GSADF tests to examine whether the multiple bubbles exist in
the bond markets of developed countries. The results demonstrate that there is an evidence
of multiple bubbles in the government bond markets of United States, Germany, and Japan.
The main causes of the bubbles are huge fiscal deficit caused by the massive government debt-
raising in order to adopt expansionary fiscal policies, over-tightening of monetary policy and
significant volatility in the global markets resulted from two oil shocks. In recent years,
major developed countries have adopted expansionary fiscal policies like tax-cutting and
infrastructure expenditures to improve economic fundamentals by huge debt-raising. This
study reminds government officials need to guard against the impacts of excessive uses of
expansionary fiscal policies on the bond markets and international investors must pay greater
attention to the impacts of fiscal deficits for the management of investment portfolios.
International Journal of Information and Management Sciences2019 30(3), p.271-282