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A Framework for Financial Market Development

Ralph Chami (), Sunil Sharma () and Connel Fullenkamp ()

No 09/156, IMF Working Papers from International Monetary Fund

Abstract: The paper proposes a framework for examining the process of financial market development. The framework, consistent with the functional view of financial system design, is anchored in studying the incentives facing the key players in financial markets-borrowers, lenders, liquidity providers, and regulators-whose actions determine whether and how markets develop. While different financial instruments embody different concessions by borrowers and lenders, the framework emphasizes the two main compromises: the tradeoffs between maturity and collateral, and between seniority and control. The framework is used to analyze the sequencing of financial market development.

Keywords: Financial systems; Financial risk; Financial instruments; Financial sector; Bond markets; Banking sector; Banks; Capital markets; Demand for money; Risk management; Securities markets; Loans; Stock markets; Financial market development, contracts, borrowers, lenders, liquidity providers, regulators, New Institutional Economics, bonds, cash flows, bond, financial markets, financial market, General Financial Markets: General (includes Measurement and Data), General Financial Markets: Government Policy and Regulation, Asymmetric and Private Information, Production And Organizations, (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-rmg
Date: 2009-07-01
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Journal Article: A framework for financial market development (2010) Downloads
Journal Article: A framework for financial market development (2010) Downloads
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Handle: RePEc:imf:imfwpa:09/156