Managing Risks in Financial Market Development: The Role of Sequencing

Publication Date:

June 1, 2003

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:

This paper proposes an integrated and risk-based approach to the sequencing and coordination of reforms to develop domestic financial markets. The paper argues that there is a hierarchy of financial markets that reflects the complexity of risks in each market and the interlinkages among markets. On the basis of this hierarchy, a sequencing of market development and risk-mitigation measures is proposed to minimize both macroeconomic and financial risks. Capital account opening can complement (but not substitute for) domestic institutional and market reforms to support the growth of local financial markets. The paper also argues that domestic institutional investors are critical to market development and risk mitigation.

Series:

Working Paper No. 2003/116

Subject:

Currency markets Financial markets Financial regulation and supervision Market risk Money markets Securities markets Stock markets

English

Publication Date:

June 1, 2003

ISBN/ISSN:

9781451853957/1018-5941

Stock No:

WPIEA1162003

Pages:

37

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