Contractual Savings in Countries with a Small Financial Sector
30 Pages Posted: 20 Apr 2016
Date Written: May 7, 2002
Countries with small financial systems are generally small economies with a reduced dimension of institutional relationships, a greater concentration of wealth, and a relatively less independent civil service. These characteristics facilitate concentration of functions and, more generally, weak governance. Only small economies with a relatively high level of per capita income, minimum core of sound banks and insurance companies, sound and credible macroeconomic policies, and open capital accounts can benefit from the development of contractual savings. This can increase the options to obtain sound coverage against contingencies, increase the supply of long term savings, promote financial deepening, and improve financial risk management.
This paper - a product of the Financial Sector Development Department - is part of a larger effort in the department to study the effects of contractual savings on financial markets.
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