A Framework for Financial Market Development

Ralph Chami, Sunil Sharma () and Connel Fullenkamp

No 2009/156, 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: WP; covered bond; primary market; financial market development; preferred shares; secondary market; financial instruments; contracts; borrowers; lenders; liquidity providers; regulators; New Institutional Economics; financial product; commercial paper; family firm; bond issue; buy and hold; Securities markets; Financial sector development; Securities; Bonds; Baltics; Southeast Asia; Europe (search for similar items in EconPapers)
Pages: 58
Date: 2009-07-01
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Citations: View citations in EconPapers (7)

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Journal Article: A framework for financial market development (2010)
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