Regulatory Lessons from the Crisis of Costa Rica’s Mutual Fund Industry

Author/Editor:

Ana Carvajal

Publication Date:

December 1, 2006

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:

In 2004, the mutual fund industry of Costa Rica experienced a massive run by investors that reduced the industry to half its size in a month. This paper explores how weaknesses in the regulatory framework played a role in the crisis and draws lessons for developing countries. The analysis of events demonstrates the need for developing countries to design a multi-pillar framework for securities regulation as well as to strengthen financial literacy and capacity building. At the micro level it shows the importance of market conduct rules and the challenges that the implementation of mark-to-market poses for developing markets.

Series:

Working Paper No. 2006/288

Subject:

Banking Money markets Mutual funds Nonbank financial institutions Securities markets

Frequency:

Bimonthly

English

Publication Date:

December 1, 2006

ISBN/ISSN:

9781451865486/1018-5941

Stock No:

WPIEA2006288

Pages:

26

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