Managing Risks in Financial Market Development: The Role of Sequencing
38 Pages Posted: 21 Sep 2011
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Managing Risks in Financial Market Development: The Role of Sequencing
Managing Risks in Financial Market Development: The Role of Sequencing
Date Written: December 1990
Abstract
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.
Keywords: Financial systems, Capital markets, Capital account liberalization, Financial risk
Suggested Citation: Suggested Citation
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