The Depth Of The Financial System: The Trends For Developed And Developing Countries

This study examines the trend in the depth of the financial markets over the 2001-2011 period with a particular focus on the period surrounding the 2008-2009 global crisis. We examine the trend in 11 depth variables for high-income OECD, high-income non-OECD, middle-income, and low-income countries. Our results show that stock market capitalization went down for all groups after 2007. We also find that there was a big jump in the stock market value traded in low-income countries in 2007 which later reversed in 2008. We find that after 2007 or 2008, outstanding domestic and international public debt and international private debt went up, while domestic private debt securities went down for the high- and middle-income groups (no data were available for the low-income group). There were more international debt issues for high-income groups after 2008. In terms of liabilities and assets, our results show that gross portfolio equity assets and liabilities as well as debt liabilities went down in 2007 and then up after 2008 for the high-income and middle-income groups. Gross portfolio debt assets went down in 2006 and then up after 2007 for the high-income groups. Overall, the results show that there were changes in all of these depth measures (especially for the high-income and middle-income countries) due the 2008-2009 global crisis. Most of these measures reversed one year later. These findings should help policymakers by showing them the types of changes that happen in their country’s financial system when a global economic crisis happens.