Financial market development, monetary policy and financial stability in emerging market economies

Bank for International Settlements

No 113 in BIS Papers from Bank for International Settlements

Abstract: Financial markets are an important component in the transmission of monetary policy and play a key role in fostering financial stability. Financial market development (FMD) aims at enhancing the capacity of the financial system to pool domestic savings and foreign capital in funding investment and consumption, and at enabling efficient risk-sharing. Deep and liquid markets promote transparent and efficient pricing of assets, attract a diverse investor base, and help transfer risk to parties willing and able to bear them. This volume contains papers that were originally prepared for a meeting of Deputy Governors of central banks from emerging market economies (EMEs), exploring issues related to FMD and its interaction with, as well as implications for, the conduct of monetary policy and financial stability. Several of the papers offer insights into the changing nature of interactions between monetary policy and financial markets in EMEs. They discuss how market development influences the choice of policy targets and instruments, as well as the efficiency of domestic monetary transmission. They also discuss the importance of global factors in shaping domestic monetary conditions and how FMD has enabled central banks to extract useful information from financial markets. Another area covered by the papers in this volume relates to the financial stability implications of FMD. They point to the benefits of more developed markets in terms of enhanced resilience and efficiency in providing new tools to raise funds and manage risks, as well as to the risks associated with high foreign investor participation, growing private sector foreign currency debt levels and the growing role of non-bank financial institutions. The papers raise several policy challenges such as developing hedging markets, improving monitoring of FX flows, and implementing macroprudential tools and FX intervention.

Date: 2020 Written 2020-12
ISBN: 978-92-9259-442-8
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Citations: View citations in EconPapers (1)

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Chapters in this book:

Financial market development and monetary policy , pp 1-18

Aaron Mehrotra and Jochen Schanz

Financial market development and financial stability , pp 19-38

Carlos Cantu Garcia and Michael Chui

Financial market development, monetary policy and financial stability in an emerging market economy , pp 39-53

Jorge Carrera, Horacio Aguirre and Marcelo Raffin

Financial market development, monetary policy and financial stability in Brazil , pp 55-65

João Barata R.B. Barroso and Fernanda Nechio

Financial market developments in Chile , pp 67-82

Joaquín Vial

How foreign participation in the Colombian local public debt market has influenced domestic financial conditions , pp 83-119

José Romero, Hernando Vargas-Herrera, Pamela Cardozo and Andrés Murcia

From float to currency floor and back to float: the Czech National Bank’s temporary exchange rate commitment , pp 121-131

Jan Frait and Marek Mora

Foreign participation in the local currency bond markets of emerging market economies: good or bad for market resilience and financial stability? , pp 133-140

Hong Kong Monetary Authority

Market development and monetary policy – the case of Hungary , pp 141-154

Marton Nagy, Gabriella Csom-Biro, Daniel Horvath and Szabolcs Pásztor

FFinancial market development in Indonesia , pp 155-161

Destry Damayanti, Yoga Affandi, Indra G Sutarto and Mario S Simatupang

Developments in Israel’s foreign exchange market and the implications for the conduct of monetary policy and financial stability , pp 163-171

Andrew Abir

Financial market development, monetary policy and financial stability in Korea , pp 173-182

Bank of Korea

How has financial market development affected monetary policy and financial stability in EMEs: the Malaysian experience , pp 183-194

Bank Negara Malaysia

Financial market development, monetary policy and financial stability in emerging market economies (Mexico) , pp 195-206

Bank of Mexico

Financial market development and monetary policy: the Peruvian experience , pp 207-218

Renzo Rossini, Carlos Montoro and Miriam Luna

The development of financial markets in the Philippines and its interaction with monetary policy and financial stability , pp 219-242

Francisco G Dakila

How to benefit from financial deepening while preserving financial and macroeconomic stability: the case of Poland , pp 243-254

Piotr J Szpunar

Financial markets in EMEs – what has changed in the last two decades , pp 255-266

Central Bank of the Russian Federation

Financial markets in EMEs – what has changed in the last two decades? , pp 267-277

Saudi Arabian Monetary Authority

Balancing the risks and rewards of fintech developments , pp 279-291

Monetary Authority of Singapore

Financial market development, monetary policy and financial stability in emerging market economies , pp 293-305

South African Reserve Bank

Financial market development, monetary policy and financial stability in emerging market economies , pp 307-314

Bank of Thailand

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Persistent link: https://EconPapers.repec.org/RePEc:bis:bisbps:113

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