Managing Risks in Financial Market Development: The Role of Sequencing

38 Pages Posted: 21 Sep 2011

See all articles by Cem Karacadag

Cem Karacadag

International Monetary Fund (IMF) - Monetary and Exchange Affairs Department

V. Sundararajan

International Monetary Fund (IMF)

Jennifer E. Elliott

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

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

Karacadag, Cem and Sundararajan, V. and Elliott, Jennifer E., Managing Risks in Financial Market Development: The Role of Sequencing (December 1990). IMF Working Paper No. 03/116, Available at SSRN: https://ssrn.com/abstract=1930789

Cem Karacadag

International Monetary Fund (IMF) - Monetary and Exchange Affairs Department ( email )

700 19th Street NW
Washington, DC 20431
United States

V. Sundararajan

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Jennifer E. Elliott

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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