The forces shaping the revolution in banking and capital markets have radically changed the financial landscape during the past three decades. A remarkable feature of this changing new landscape has been the astonishing rate of internationalisation of the financial system in the last two decades, with emerging markets becoming increasingly important participants. At times this participation has led to excessive reliance on foreign financing, making the participation of these countries in the global financial system more vulnerable to shifts in expectations and perceptions. The sovereign debt management strategy suffered from many structural weaknesses, failing to take into account international best practices in financing budget deficits and developing domestic government securities markets. Consequently, emerging markets experienced episodes of serious financial crises. Against this background, this article focuses on new and more sophisticated strategies to develop domestic bond markets, taking into account the risk profile, complexities and other constraints of emerging markets. The article's central thesis is that risk-based public debt management and liquid domestic bond markets are important mutually reinforcing strategies for emerging financial markets to attain (1) enhanced financial stability, and (2) a more successful participation in the global financial landscape. It will also be shown that this twin-strategies approach requires taking a macroeconomic policy perspective.
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Article provided by International Trade and Finance Association in its journal Global Economy Journal.
Volume (Year): 7 (2007) Issue (Month): 2 () Pages: 2 Download reference. The following formats are available: HTML,
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Aart Kraay & Norman Loayza & Luis Servén & Jaume Ventura, 2000.
"Country portfolios,"
Economics Working Papers
913, Department of Economics and Business, Universitat Pompeu Fabra.
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Aart Kraay & Norman Loayza & Luis Serven & Jaume Ventura, 2000.
"Country Portfolios,"
NBER Working Papers
7795, National Bureau of Economic Research, Inc.
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