Abstract
National capital markets can be positioned along a continuum ranging from embryonic to mature and emerged markets according to a decreasing ‘national cost of capital’ criterion. Newly emerging countries are handicapped by a high cost of capital because of ‘incomplete’ and inefficient financial markets. As capital markets graduate to higher level of ‘emergedness’, their national firms avail themselves of a lower cost of capital that makes them more competitive in the global economy and spurs economic growth. This chapter argues that the dynamics of emerging markets are driven by: 1) the skillful transfer of financial innovations to emerging markets committed to deregulating their financial sector, 2) disintermediation of traditional financial intermediaries (mostly commercial banks) in favor of a more cost effective commercial paper market, and 3) securitization of consumer finance which reduces households’ cost of living.
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© 2001 Springer Science+Business Media New York
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Jacque, L.L. (2001). Financial Innovations and the Dynamics of Emerging Capital Markets. In: Jacque, L.L., Vaaler, P.M. (eds) Financial Innovations and the Welfare of Nations. Springer, Boston, MA. https://doi.org/10.1007/978-1-4615-1623-1_1
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DOI: https://doi.org/10.1007/978-1-4615-1623-1_1
Publisher Name: Springer, Boston, MA
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