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A Framework for Financial Market Development

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Author Info

  • Ralph Chami
  • Sunil Sharma
  • Connel Fullenkamp

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.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/156.

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Length: 58
Date of creation: 01 Jul 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/156

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Keywords: Financial instruments; Banking sector; Banks; Financial risk; Financial sector; Financial systems; Risk management; Stock markets; bonds; cash flows; bond; financial markets; financial market; credit; shares; financial market development; collateral; repo; bond market; derivative; financial system; counterparty; payments; equity market; equity markets; money market; government bonds; bond markets; government bond; prices; backed bonds; financial contracts; pricing; derivatives market; bond market development; revenue bonds; financial intermediaries; derivative markets; custodian; shareholders; hedge; cash flow; financial regulation; financial stability; moral hazard; money market instruments; government bond markets; repurchase agreement; bond issue; reserve requirements; derivative product; bond payments; derivative contracts; systemic risk; derivatives markets; obligation bonds; corporate bond market; purchases; crowding out; financial statements; stock holders; credit derivative; financial economics; stock exchanges; financial assets; payment system; stock exchange; corporate bond; general obligation bonds; financial institutions; stock market; interest rate derivatives; new york stock exchange; development of bond markets; clients; municipal bonds; retail payments; corporate bonds; deposit insurance; contractual obligations; traditional bonds; revenue bond; interest rate ceilings; financial structure; bond indentures; bond issuer; bond portfolios; confirmation; derivative instruments; registration; custodial services; compensating balances; bond futures; bond purchases; cash management; holders of bond; developing government bond markets; retail investors; financial derivatives; municipal bond; stock index; developing government bond; deposit interest; repo agreement; bond indenture; derivative transactions; bond issuance; zero-coupon bonds; credit derivatives; penalties; government bond market; bondholders; bond contract; financial resources; position limits; markets for bonds; prepayment; treasury bonds; liquidity support; municipal revenue bonds; pools; close out; issuance of revenue bonds; secondary bond market; financial liberalization; stock issuance; coupon bonds; derivative securities; foreign exchange derivatives; private bonds; financial services; international financial system; asset markets; financial dependence; segregation;

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References

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Citations

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Cited by:
  1. Goswami, Mangal & Sharma, Sunil, 2011. "The Development of Local Debt Markets in Asia: An Assessment," ADBI Working Papers, Asian Development Bank Institute 326, Asian Development Bank Institute.
  2. Kamal A. El-Wassal, 2013. "The Development of Stock Markets: In Search of a Theory," International Journal of Economics and Financial Issues, Econjournals, vol. 3(3), pages 606-624.
  3. Mangal Goswami & Sunil Sharma, 2011. "The Development of Local Debt Markets in Asia," IMF Working Papers 11/132, International Monetary Fund.
  4. Clara Cardone-Riportella & Antonio Trujillo-Ponce & Anahí Briozzo, 2013. "Analyzing the role of mutual guarantee societies on bank capital requirements for small and medium-sized enterprises," Journal of Economic Policy Reform, Taylor & Francis Journals, Taylor & Francis Journals, vol. 16(2), pages 142-159, June.
  5. Zuzana Kucerova & Jitka Pomenkova, 2014. "Financial and Trade Integration of Selected EU Regions: Dynamic Correlation and Wavelet Approach," MENDELU Working Papers in Business and Economics, Mendel University in Brno, Faculty of Business and Economics 2014-45, Mendel University in Brno, Faculty of Business and Economics.
  6. Ilhyock Shim & Haibin Zhu, 2010. "The impact of CDS trading on the bond market: evidence from Asia," BIS Working Papers 332, Bank for International Settlements.
  7. Mariano Beltrani & Juan Cuattromo, 2012. "Redefining Monetary Policy Limits: Towards an Expansion of its Role in Economic Development," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, Central Bank of Argentina, Economic Research Department, vol. 1(67), pages 121-168, December.
  8. Shim, Ilhyock & Zhu, Haibin, 2014. "The impact of CDS trading on the bond market: Evidence from Asia," Journal of Banking & Finance, Elsevier, Elsevier, vol. 40(C), pages 460-475.

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