Rethinking Financial Deepening : Stability and Growth in Emerging Markets

Author/Editor:

Adolfo Barajas ; Annette J Kyobe ; Christian Saborowski ; Diana B Ayala Pena ; Katsiaryna Svirydzenka ; Lam Nguyen ; Martin Cihak ; Papa M N'Diaye ; Ran Bi ; Ratna Sahay ; Reza Yousefi ; Yuan Gao

Publication Date:

May 4, 2015

Electronic Access:

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Summary:

The global financial crisis experience shone a spotlight on the dangers of financial systems that have grown too big too fast. This note reexamines financial deepening, focusing on what emerging markets can learn from the advanced economy experience. It finds that gains for growth and stability from financial deepening remain large for most emerging markets, but there are limits on size and speed. When financial deepening outpaces the strength of the supervisory framework, it leads to excessive risk taking and instability. Encouragingly, the set of regulatory reforms that promote financial depth is essentially the same as those that contribute to greater stability. Better regulation—not necessarily more regulation—thus leads to greater possibilities both for development and stability.

Series:

Staff Discussion Notes No. 15/08

Subject:

Notes:

Link to data appendix for this title

English

Publication Date:

May 4, 2015

ISBN/ISSN:

9781498312615/2221-030X

Stock No:

SDNEA201508

Price:

$10.00 (Academic Rate:$10.00)

Format:

Paper

Pages:

41

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