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Domestic Capital Market Reform and Access to Global Finance: Making Markets Work

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  • Peter Blair Henry
  • Peter Lombard Lorentzen

Abstract

Contrary to the predictions of standard economic theory, capital market liberalization has been a mixed blessing for many countries. Liberalization of debt inflows exposes economies to the risk of crises stemming from sudden changes in investor sentiment. Equity market liberalizations, on the other hand, have promoted growth in almost every liberalizing country. Yet equity market liberalizations have not had as strong an effect as might be expected. To convince outsiders to invest, countries must put in place laws and supporting institutions to protect the rights of minority shareholders. Countries with such protections tend to have larger, more efficient, and more stable stock markets than those that do not.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10064.

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Date of creation: Nov 2003
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Publication status: published as Litan, Robert E., M. Pomerleano, and V. Sundararajan (eds.) The Future of Domestic Capital Markets in Developing Countries. Baltimore, MD: Brookings Institution Press, 2003.
Handle: RePEc:nbr:nberwo:10064

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Citations

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Cited by:
  1. Filippo Brutti, 2010. "Legal enforcement, public supply of liquidity and sovereign risk," IEW - Working Papers 464, Institute for Empirical Research in Economics - University of Zurich.
  2. Laura Alfaro & Sebnem Kalemli-Ozcan & Vadym Volosovych, 2008. "Why Doesn't Capital Flow from Rich to Poor Countries? An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 347-368, May.
  3. Henry, Peter B., 2004. "Perspective Paper on Financial Instability," Research Papers 1866, Stanford University, Graduate School of Business.
  4. Laura Alfaro & Sebnem Kalemli-Ozcan & Vadym Volosovych, 2007. "Capital Flows in a Globalized World: The Role of Policies and Institutions," NBER Chapters, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences, pages 19-72 National Bureau of Economic Research, Inc.
  5. Jo�l van der Weele, 2005. "Financing development: debt versus equity," DNB Working Papers 038, Netherlands Central Bank, Research Department.
  6. Bae, Kee-Hong & Goyal, Vidhan K., 2010. "Equity market liberalization and corporate governance," Journal of Corporate Finance, Elsevier, vol. 16(5), pages 609-621, December.
  7. Henry, Peter B., 2006. "Capital Account Liberalization: Theory, Evidence, and Speculation," Research Papers 1951, Stanford University, Graduate School of Business.
  8. Friedman, Felice B. & Grose, Claire, 2006. "Promoting access to primary equity markets : a legal and regulatory approach," Policy Research Working Paper Series 3892, The World Bank.
  9. Serkan Arslanalp & Peter Blair Henry, 2004. "Helping the Poor to Help Themselves: Debt Relief or Aid," NBER Working Papers 10230, National Bureau of Economic Research, Inc.
  10. Kristin J. Forbes, 2005. "The Microeconomic Evidence on Capital Controls: No Free Lunch," NBER Working Papers 11372, National Bureau of Economic Research, Inc.
  11. Chen, Xing & Munasib, Abdul & Roy, Devesh, 2012. "Financial reforms and international trade:," IFPRI discussion papers 1182, International Food Policy Research Institute (IFPRI).
  12. Peter Henry, 2007. "Capital Account Liberalization: Theory, Evidence, and Speculation," Discussion Papers 07-004, Stanford Institute for Economic Policy Research.

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