A Framework for Financial Market Development

Author/Editor:

Ralph Chami ; Sunil Sharma ; Connel Fullenkamp

Publication Date:

July 1, 2009

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The paper proposes a framework for examining the process of financial market development. The framework, consistent with the functional view of financial system design, is anchored in studying the incentives facing the key players in financial markets-borrowers, lenders, liquidity providers, and regulators-whose actions determine whether and how markets develop. While different financial instruments embody different concessions by borrowers and lenders, the framework emphasizes the two main compromises: the tradeoffs between maturity and collateral, and between seniority and control. The framework is used to analyze the sequencing of financial market development.

Series:

Working Paper No. 2009/156

Subject:

Bonds Financial institutions Financial instruments Financial markets Financial sector development Securities Securities markets

English

Publication Date:

July 1, 2009

ISBN/ISSN:

9781451873030/1018-5941

Stock No:

WPIEA2009156

Pages:

58

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