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Enforcement Problems and Secondary Markets

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  • Fernando A. Broner
  • Alberto Martin
  • Jaume Ventura

Abstract

There is a large and growing literature that studies the effects of weak enforcement institutions on economic performance. This literature has focused almost exclusively on primary markets, in which assets are issued and traded to improve the allocation of investment and consumption. The general conclusion is that weak enforcement institutions impair the workings of these markets, giving rise to various inefficiencies. But weak enforcement institutions also create incentives to develop secondary markets, in which the assets issued in primary markets are retraded. This paper shows that trading in secondary markets counteracts the effects of weak enforcement institutions and, in the absence of further frictions, restores efficiency.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13559.

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Date of creation: Oct 2007
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Publication status: published as Fernando A. Broner & Alberto Martin & Jaume Ventura, 2008. "Enforcement Problems and Secondary Markets," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 683-694, 04-05.
Handle: RePEc:nbr:nberwo:13559

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References

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  1. Fernando A. Broner & Alberto Martín & Jaume Ventura, 2006. "Sovereign Risk and Secondary Markets," Working Papers 288, Barcelona Graduate School of Economics.
  2. Broner, Fernando A & Ventura, Jaume, 2010. "Rethinking the Effects of Financial Liberalization," CEPR Discussion Papers 8171, C.E.P.R. Discussion Papers.
  3. Jaume Ventura & Fernando A. Broner, 2006. "Globalization and Risk Sharing," NBER Working Papers 12482, National Bureau of Economic Research, Inc.
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Cited by:
  1. Aitor Erce Domiguez, 2010. "Debtor Discrimination During Sovereign Debt Restructurings," 2010 Meeting Papers 1324, Society for Economic Dynamics.
  2. Ricardo Bebczuk & Maria Lorena Garegnani, 2012. "Real State as Housing and as Financial Investment: A First Assessment for Argentina," Department of Economics, Working Papers 095, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.
  3. Fernando Broner & Jaume Ventura, 2010. "Rethinking the Effects of Financial Liberalization," Working Papers 509, Barcelona Graduate School of Economics.
  4. Viral V. Acharya & Itamar Drechsler & Philipp Schnabl, 2011. "A Pyrrhic Victory? - Bank Bailouts and Sovereign Credit Risk," NBER Working Papers 17136, National Bureau of Economic Research, Inc.
  5. Aitor Erce, 2012. "Selective sovereign defaults," Globalization and Monetary Policy Institute Working Paper 127, Federal Reserve Bank of Dallas.
  6. Mario Cuevas & Sigfrido Lee & Maria Isabel Bonilla, 2011. "The Missing Foundations of Housing Finance: Incomplete Markets, Fragmented Policies and Emerging Solutions in Guatemala," Research Department Publications 4750, Inter-American Development Bank, Research Department.
  7. Claudio Raddatz & Sergio Schmukler, 2010. "Pension Funds And Capital Market Development: How Much Bang For The Buck?," Working Papers 38, Superintendencia de Pensiones, revised Feb 2010.
  8. Miguel Palomino Bonilla & Rudy Wong Barrantes, 2011. "Housing Finance in Peru: What is Holding it Back?," Research Department Publications 4748, Inter-American Development Bank, Research Department.
  9. Yeyati, Eduardo Levy & Schmukler, Sergio L. & Van Horen, Neeltje, 2007. "Emerging market liquidity and crises," Policy Research Working Paper Series 4445, The World Bank.

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