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A paradox of emerging government securities market development

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  • Endo, Tadashi

Abstract

Many governmental and international attempts to develop government securities markets (GSMs) in low-income economies have been unsuccessful. Common causes of the failures are a lack of understanding of the development dynamics of emerging GSMs and developmentally and locally suitable policies. Emerging GSMs tend to get trapped in a paradoxical market failure in which the market system cannot develop a GSM or core financial infrastructure. In contrast to advanced GSMs in which the government plays a minor role, emerging GSMs require the government to play a significant role in establishing and supporting a market structure that provides traders with “utilities” to facilitate trading. Using a multiplicative factor model and diagrams and referring to empirically observed development patterns of the Indian GSM, this study examined the effects of “utilities” and found that diminishing returns to utility explained the development dynamics of emerging GSMs. The analyses in this study also used the theories of club, consumer purchasing behavior, and diffusion of innovation. For better policy analyses and formulation for emerging GSM development, the study proposes a financial market utility hypothesis and a two-dimensional policy framework.

Suggested Citation

  • Endo, Tadashi, 2025. "A paradox of emerging government securities market development," Research in International Business and Finance, Elsevier, vol. 73(PB).
    • Handle: RePEc:eee:riibaf:v:73:y:2025:i:pb:s0275531924003751
    DOI: 10.1016/j.ribaf.2024.102582
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    References listed on IDEAS

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    More about this item

    Keywords

    Emerging government securities market; Market failure; Government intervention; Market structure; Utility; Diminishing returns;
    All these keywords.

    JEL classification:

    • 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
    • O20 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - General

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