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Towards Strong and Stable Capital Markets in Emerging Market Economies

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  • Liliana Rojas-Suarez

Abstract

This paper identifies and discusses the conditions needed for achieving strong and stable capital markets in emerging market economies, which at present remain illiquid and underdeveloped. These conditions can be grouped into four pillars: macroeconomic stability, sound banking systems, high institutional quality, and an adequate regulatory and supervisory framework. A central message is that these pillars are interdependent: failure to strengthen any of these pillars will weaken the others; all pillars are complementary and equally important. The paper also emphasizes that the inability of emerging markets to issue safe assets imposes a major constraint on the resilience of their local capital markets to external shocks.

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  • Liliana Rojas-Suarez, 2014. "Towards Strong and Stable Capital Markets in Emerging Market Economies," Policy Papers 42, Center for Global Development.
    • Handle: RePEc:cgd:ppaper:42
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    Cited by:

    1. Krisztina Jäger-Gyovai, 2014. "Capital Market Development in CESEE and the Need for Further Reform," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 27, pages 74-82.
    2. Chiang, Thomas C. & Chen, Xiaoyu, 2016. "Stock returns and economic fundamentals in an emerging market: An empirical investigation of domestic and global market forces," International Review of Economics & Finance, Elsevier, vol. 43(C), pages 107-120.
    3. Thomas C. Chiang & Lanjun Lao & Qingfeng Xue, 2016. "Comovements between Chinese and global stock markets: evidence from aggregate and sectoral data," Review of Quantitative Finance and Accounting, Springer, vol. 47(4), pages 1003-1042, November.
    4. Chen, Xiaoyu & Chiang, Thomas C., 2016. "Stock returns and economic forces—An empirical investigation of Chinese markets," Global Finance Journal, Elsevier, vol. 30(C), pages 45-65.
    5. Thomas C. Chiang & Yuanqing Zhang, 2018. "An Empirical Investigation of Risk-Return Relations in Chinese Equity Markets: Evidence from Aggregate and Sectoral Data," IJFS, MDPI, vol. 6(2), pages 1-22, March.

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