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A Framework for Developing Secondary Markets for Government Securities

  • Zsófia Ãrvai
  • Geoffrey Heenan
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    This paper consolidates previous work on the development of secondary markets for government securities, and focuses on the sequencing of measures necessary for their development. Six main lessons are identified: (i) a commitment to achieving and maintaining a stable macroeconomic environment, especially prudent fiscal policy, should underpin market development; (ii) a sound and transparent public debt management strategy supports secondary market activity; (iii) a deep and diverse investor base is required; (iv) poor market infrastructure leads to high transaction costs, slow order execution, and excessive operational risk, which all inhibit trading; (v) secondary market growth is facilitated by effective monetary policy implementation; and (vi) reforms should be sequenced to ensure even development of all the structures supporting the secondary market.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/174.

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    Length: 55
    Date of creation: 01 Jul 2008
    Date of revision:
    Handle: RePEc:imf:imfwpa:08/174
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    1. Vittas, Dimitri, 1998. "Institutional investors and securities markets : which comes first?," Policy Research Working Paper Series 2032, The World Bank.
    2. Claessens, Stijn & Klingebiel, Daniela & Schmukler, Sergio, 2003. "Government Bonds in Domestic and Foreign Currency: The Role of Macroeconomic and Institutional Factors," CEPR Discussion Papers 3789, C.E.P.R. Discussion Papers.
    3. George Iden & Marco Arnone, 2003. "Primary Dealers in Government Securities; Policy Issues and Selected Countries Experience," IMF Working Papers 03/45, International Monetary Fund.
    4. Garry J. Schinasi & T. Todd Smith, 1998. "Fixed-Income Markets in the United States, Europe, and Japan-Some Lessons for Emerging Markets," IMF Working Papers 98/173, International Monetary Fund.
    5. Csaba Csávás & Lóránt Varga & Csaba Balogh, 2008. "The forint interest rate swap market and the main drivers of swap spreads," MNB Occasional Papers 2008/64, Magyar Nemzeti Bank (the central bank of Hungary).
    6. International Monetary Fund, 2003. "Managing Risks in Financial Market Development; The Role of Sequencing," IMF Working Papers 03/116, International Monetary Fund.
    7. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    8. Robert T. Price, 1997. "The Rationale and Design of Inflation-Indexed Bonds," IMF Working Papers 97/12, International Monetary Fund.
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