Regulatory Lessons from the Crisis of Costa Rica's Mutual Fund Industry

28 Pages Posted: 12 Jan 2007

See all articles by Ana Carvajal

Ana Carvajal

International Monetary Fund (IMF)

Date Written: January 2007

Abstract

In 2004, the mutual fund industry of Costa Rica experienced a massive run by investors that reduced the industry to half its size in a month. This paper explores how weaknesses in the regulatory framework played a role in the crisis and draws lessons for developing countries. The analysis of events demonstrates the need for developing countries to design a multi-pillar framework for securities regulation as well as to strengthen financial literacy and capacity building. At the micro level it shows the importance of market conduct rules and the challenges that the implementation of mark-to-market poses for developing markets.

Keywords: Securities markets, Costa Rica, Stock markets, Securities regulations, Financial systems, Financial crisis, Emerging markets, Developing countries

JEL Classification: K22, G18, G24, G28

Suggested Citation

Carvajal, Ana, Regulatory Lessons from the Crisis of Costa Rica's Mutual Fund Industry (January 2007). IMF Working Paper No. 06/288, Available at SSRN: https://ssrn.com/abstract=956752

Ana Carvajal (Contact Author)

International Monetary Fund (IMF) ( email )

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

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