Description

The paper proposes a framework for examining the process of financial market development. The framework, consistent with the functional view of financial system design, is anchored in studying the incentives facing the key players in financial markets-borrowers, lenders, liquidity providers, and regulators-whose actions determine whether and how markets develop. While different financial instruments embody different concessions by borrowers and lenders, the framework emphasizes the two main compromises: the tradeoffs between maturity and collateral, and between seniority and control. The framework is used to analyze the sequencing of financial market development.

Taxonomy

Banks and banking , Bond markets , Capital markets , Demand for money , Economic policy , Financial institutions and markets , Loans , Monetary policy , Securities markets

More publications in this series: Working Papers

More publications by: Ralph Chami ; Sunil Sharma ; Connel Fullenkamp