Managing Risks in Financial Market Development: The Role of Sequencing

International Monetary Fund

No 2003/116, IMF Working Papers from International Monetary Fund

Abstract: This paper proposes an integrated and risk-based approach to the sequencing and coordination of reforms to develop domestic financial markets. The paper argues that there is a hierarchy of financial markets that reflects the complexity of risks in each market and the interlinkages among markets. On the basis of this hierarchy, a sequencing of market development and risk-mitigation measures is proposed to minimize both macroeconomic and financial risks. Capital account opening can complement (but not substitute for) domestic institutional and market reforms to support the growth of local financial markets. The paper also argues that domestic institutional investors are critical to market development and risk mitigation.

Keywords: WP; debt market; market development; secondary market; central bank; continuous market; government bond; interbank market; interest rate; market participant; primary market; financial markets; capital markets; capital account liberalization; sequencing; market development policy; active market; price discovery; debt securities market; market liquidity; market rule; financial condition; E. derivatives market development; Securities markets; Currency markets; Stock markets; Money markets; Market risk; Global; East Asia; Asia and Pacific (search for similar items in EconPapers)
Pages: 37
Date: 2003-06-01
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Citations: View citations in EconPapers (21)

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