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The primary dealer system in lower-income economies

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  • Endo, Tadashi

Abstract

This work examines the commercial viability of market-making under the primary dealer system (PD system) in the government securities market (GSM) of lower-income economies, using the three-decomposition model developed for bid-ask spread analysis on the U.S. quote-driven stock markets. Evidence suggests that primary dealers (PDs) were not making a market through two-way firm quotes as it would be commercially inviable in lower-income GSMs. The finding of purposely aggressive PDs in high-income economies prompts a further study on an optimal and fair allocation of resources across the primary and secondary markets.

Suggested Citation

  • Endo, Tadashi, 2020. "The primary dealer system in lower-income economies," Emerging Markets Review, Elsevier, vol. 45(C).
    • Handle: RePEc:eee:ememar:v:45:y:2020:i:c:s1566014119302195
    DOI: 10.1016/j.ememar.2020.100715
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    More about this item

    Keywords

    Government security; Lower-income economy; Market making; Market development; Primary dealer;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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