Managing Risks in Financial Market Development: The Role of Sequencing

38 Pages Posted: 29 Jan 2006

See all articles by Cem Karacadag

Cem Karacadag

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

V. Sundararajan

International Monetary Fund (IMF)

Jennifer Elliot

affiliation not provided to SSRN

Multiple version iconThere are 2 versions of this paper

Date Written: June 2003

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 markets, capital markets, capital account liberalization, sequencing

JEL Classification: N2, G2

Suggested Citation

Karacadag, Cem and Sundararajan, V. and Elliot, Jennifer, Managing Risks in Financial Market Development: The Role of Sequencing (June 2003). IMF Working Paper No. 03/116, Available at SSRN: https://ssrn.com/abstract=879192

Cem Karacadag (Contact Author)

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 Elliot

affiliation not provided to SSRN

No Address Available