Financial Sector Development Policy: The Importance of Reputational Capital and Governance
Posted: 16 Jun 1998
Date Written: December 14, 1995
This paper surveys the main policy debates on financial sector development. It provides a framework for understanding the main functions of the financial system, emphasizing informational problems and their efficient resolution through accumulation of reputational capital and the development of effective governance structures. It examines the existence of alternative financial systems and discusses the choices for developing and transitional economies. It discusses the main areas of financial policy making, such as interest rate regulation, prudential regulation and the importance of securities markets. Finally, it proposes financial restraint as a set of policies that explicitly address the formation of reputational capital and governance structures.
JEL Classification: G18, G21, G28, G32, G38, H11, O16, P51
Suggested Citation: Suggested Citation