Financial Development in Latin America: Big Emerging Issues, Limited Policy Answers

43 Pages Posted: 20 Apr 2016

See all articles by Augusto de la Torre

Augusto de la Torre

Columbia University, School of International & Public Affairs (SIPA), Students

Juan Carlos Gozzi

Board of Governors of the Federal Reserve

Sergio L. Schmukler

World Bank - Development Research Group (DECRG)

Date Written: July 1, 2006

Abstract

This paper argues that the dominant policy paradigm on financial development is increasingly insufficient to address big emerging issues that are particularly relevant for financial systems in Latin America. This paradigm was shaped over the past decades by a fundamental shift in thinking toward market-based financial development and a complex process of financial crises interpretation. The result has been a richly textured policy paradigm focused on promoting financial stability and the convergence to international standards. It argues, however, that there is a growing dissonance between the current paradigm and the emerging issues, which is illustrated by discussing challenges in three areas: stock markets, small and medium enterprise loans, and defined-contribution pension funds. The paper concludes that the dominant policy paradigm is ill-suited to provide significant guidance in relation to the big emerging issues. It emphasizes the need to take a fresh look at the evidence, improve the diagnoses, revisit expectations, and revise the paradigm.

Keywords: Financial Economics, Economic Theory & Research, Financial Intermediation, Macroeconomic Management, Markets and Market Access

Suggested Citation

de la Torre, Augusto and Gozzi, Juan Carlos and Schmukler, Sergio, Financial Development in Latin America: Big Emerging Issues, Limited Policy Answers (July 1, 2006). World Bank Policy Research Working Paper No. 3963. Available at SSRN: https://ssrn.com/abstract=923270

Augusto De la Torre (Contact Author)

Columbia University, School of International & Public Affairs (SIPA), Students ( email )

420 West 118th Street
New York, NY
United States

Juan Carlos Gozzi

Board of Governors of the Federal Reserve ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

HOME PAGE: http://www.federalreserve.gov/econresdata/juan-carlos-gozzi.htm

Sergio Schmukler

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN MC 3-301
Washington, DC 20433
United States
202-458-4167 (Phone)
202-522-3518 (Fax)

HOME PAGE: http://www.worldbank.org/en/about/people/s/sergio-schmukler

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