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Liberalisation of the capital markets in developing countries

  • Development Strategy
  • Published:
Intereconomics

Abstract

The domestic capital markets of developing countries are typically subject to serious inefficiencies. This article shows how these inefficiencies can be eliminated without necessarily provoking an adjustment crisis and indicates the measures on which emphasis must be placed in the context of structural adjustment assistance in order to mobilise a large volume of savings and achieve a better allocation of resources.

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References

  1. Cf. Bernhard Fischer: Liberalisierung der Finanzmärkte und wirtschaftliches Wachstum in Entwicklungsländern, Kieler Studien, No. 172. Tübingen 1982; Maxwell J. Fry: Money, Interest and Banking in Economic Development, Baltimore 1988.

  2. Cf. Constantine Michalopoulos: World Bank Programs for Adjustment and Growth, in: Vittorio Corbo, Morris Goldstein, Moshin Khan (eds.): Growth-oriented Adjustment Programs, International Monetary Fund and the World Bank, Washington 1987, pp. 15–62.

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  3. For a detailed description of the capital market reform in Chile and subsequent developments up to 1984, see Roberto J. Behrens Fuchs: Los bancos e instituciones financieras en la historia económica de Chile 1811–1983, Pontificia Universidad Católica de Chile, Institutio de Economía, Santiago 1985.

  4. Cf. Jose P. Arellano: De la liberalización a la intervención: el mercado de capitales en Chile: 1974–83, in: Colección Estudios Cieplan, No. 11, 1983, Estudio No. 74, pp. 5–49.

  5. Cf. Larry A. Sjaastad: Liberalization and Stabilization Experiences in the Southern Cone, in: Nicolás Ardito Barletta, Mario T. Blejer, Luis Landau (eds.): Economic Liberalization and Stabilization Policies in Argentina, Chile, and Uruguay. The World Bank, Washington 1984, pp. 83–103.

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  6. For further aspects of the successful mobilisation of savings capital, such as the flexible configuration of savings instruments, see Uwe Corsepius: Savings Mobilisation in Developing Countries, in: INTERECONOMICS, Vol. 23, 1988, No. 1, pp. 30–34.

  7. See John A. Halloran, Howard P. Lanser: Inflation-Induced Biases in the Evaluation and Selection of Capital Investments, in: The Financial Review, Vol. 18, 1983, No. 4, pp. 314–325.

  8. Cf. Stanley Fischer, Franco Modigliani: Towards an Understanding of the Real Effects and Costs of Inflation, in: Weltwirtschaftliches Archiv, Vol. 112, 1978, No. 4, pp. 810–833.

  9. For a theoretical treatment and an empirical test using Peru as an example, see Uwe Corsepius: Kapitalmarktreform in Entwicklungsländern —Eine Analyse am Beispiel Perus, Kieler Studien 225, Tübingen 1989.

  10. Cf. Paul Burkett: Interest Rate Restrictions and Deposit Opportunities for Small Savers in Developing Countries: An Analytical View, in: Journal of Development Studies, Vol. 23, 1986, No. 1, pp. 77–92.

  11. Cf. Joseph E. Stiglitz, Andrew Weiss: Credit Rationing in Markets with Imperfect Information, in: American Economic Review, Vol. 71, 1981, No. 3, pp. 393–410.

  12. Cf. Vincente Galbis: Financial Sector Liberalization under Oligopolistic Conditions and a Bank Holding Company Structure, in: Savings and Development, Vol. 10, 1986, No. 2, pp. 117–140.

  13. Cf. Yoon Je Cho: On the Liberalization of the Financial System and Efficiency of Capital Allocation under Uncertainty, Stanford 1984.

  14. See for example Andrea Calamanti: Securities Markets and Underdevelopment—The Stock Exchange in the Ivory Coast, Morocco, Tunisia, Finafrica, Milan 1983, p. 90.

  15. For details, see Uwe Corsepius, op. cit., pp. 96 ff. Kapitalmarktreform in Entwicklungsländern —Eine Analyse am Beispiel Perus, Kieler Studien 225, Tübingen 1989, pp. 96 ff.

  16. With regard to the experiences with share and bond-based investment funds in various developing countries, see United Nations Secretariat: Development of Stock Exchanges in Developing Countries, in: United Nations, Department of International Economic and Social Affairs (ed.): Savings for Development, Report on the Second International Symposium on the Mobilization of Personal Savings in Developing Countries, New York 1984, pp. 21–35.

  17. See for example Mario T. Blejer, Silvia Sagari: The Structure of the Banking Sector and the Sequence of Financial Liberalization, in: Michael Connolly, Claudio González-Vega (eds.): Economic Reform and Stabilization in Latin America, New York 1987, pp. 93–107.

  18. For a detailed exposition, see Uwe Corsepius, op. cit. Kapitalmarktreform in Entwicklungsländern —Eine Analyse am Beispiel Perus, Kieler Studien 225, Tübingen 1989.

  19. See for example Sebastian Edwards: Sequencing Economic Liberalization in Developing Countries, in: Finance and Development, Vol. 24, 1987, No. 1, pp. 26–29; Jacob A. Frenkel: Economic Liberalization and Stabilization Programs, in: Nicolás Ardito Barletta, Mario T. Blejer, Luis Landau (eds.), op. cit., pp. 12–17.

  20. Cf. Deepak Lal: The Political Economy of Economic Liberalization, in: The World Bank Economic Review, Vol. 1, 1987, No. 2, pp. 273–299.

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  1. Institut für Weltwirtschaft, Kiel, West Germany

    Uwe Corsepius

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  1. Uwe Corsepius
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Corsepius, U. Liberalisation of the capital markets in developing countries. Intereconomics 24, 220–226 (1989). https://doi.org/10.1007/BF02928638

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  • DOI: https://doi.org/10.1007/BF02928638

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