Emerging European countries have made large strides in developing their local capital markets since the early-1990s. However, the rate of development has been widely disparate across countries and market segments, underpinned by the varying degrees of progress made in key areas such as establishing pricing benchmarks, adopting, implementing and enforcing securities laws and regulations, encouraging the growth of an institutional investor base, and providing adequate trading infrastructure. This paper provides an overview of the trends in the region's local capital markets, and examines the main factors that have contributed to their growth and effectiveness to date. It also discusses selected policy responses necessary to further improve the breadth and depth of these markets.
The objective of this paper is to discuss the key issues relating to the development of local corporate bond markets. We examine the requirements for local corporate bond market development, and compare and contrast experiences across both mature and emerging markets. We suggest that core aspects such as benchmarking, corporate governance and disclosure, credit risk pricing, the availability of reliable trading systems, and the development of hedging instruments are fundamental for improving the breadth and depth of corporate debt markets. The demand and supply of corporate bonds are dependent on factors such as the investor base, both local and foreign, and government policies toward the issuance process and associated costs, as well as the taxation regime. The sequencing of reforms is key to market development.
In November 2011, the G-20 endorsed an action plan to support the development of local currency bond markets (LCBM). International institutions—the IMF, the World Bank, the EBRD, and the OECD—were asked to draw on their experience to develop a diagnostic framework (DF) to identify general preconditions, key components, and constraints for successful LCBM development. The objective is to provide a tool for analyzing the state of development and efficiency of local currency bond markets. The application of the DF is expected to be flexible, bearing in mind that the potential for LCBM development depends on economic size, financing needs, and stage of economic development.
This 2002 Article IV Consultation highlights that the economic slowdown in the United States triggered a sharp weakening in Mexican economic activity in 2001 from the rapid pace in the preceding year. There was also a marked deceleration in domestic demand growth, as disposable income was adversely affected by a contraction in employment and confidence sagged. Economic activity rebounded strongly in the second quarter of 2002, as exports were supported by stronger demand from the United States and final domestic demand grew sharply.
International Monetary Fund. Asia and Pacific Dept
This Selected Issues paper on Malaysia highlights quantitative assessment of additional measures required during the medium term to achieve fiscal targets. The authorities aim to lower the budget deficit to about 3 percent of GDP by 2015, down from 4.0 percent in 2013, and to balance the budget by 2020. It suggests that ranking fiscal instruments under different fiscal policy goals can help policymakers identify the composition of fiscal adjustment based on their preferences. By combining ranking with the instruments’ potential yield helps in identifying the optimal set of measures required to achieve the needed fiscal adjustment.
This Selected Issues paper and Statistical Appendix provide background information and analytical support for key policy issues discussed in the 2004 Article IV Consultation discussions with Mauritius. The impact of the erosion of trade preferences on exports, growth, and employment is assessed under two scenarios—a moderate and an extreme scenario. To quantify the adverse impact of trade liberalization, the paper estimates various elasticities of GDP growth to exports, and unemployment to growth. The paper also analyzes the labor market institutions and low-skilled employment in Mauritius.
The paper discusses potential output, the output gap, and inflation in Korea. The paper explores the information content of potential leading indicators of inflation. A broadly balanced current account has been the suggested norm for Korea over the medium term. The challenge is to help build a more robust bond market that prices risk appropriately. The features of pension schemes in Korea and the problems they face are outlined. The paper reviews pension reform, banking sector, corporate sector, and foreign exchange crises with respect to Korea.
Mahmood Pradhan, Mr. Shanaka J Peiris, Mr. Mangal Goswami, Mr. Joshua Felman, Andreas Jobst, and Mr. Simon T Gray
Since the Asian crisis, ASEAN5 countries have expended considerable effort in trying to develop their domestic bond markets. Yet today these markets are not much larger, relative to GDP, than they were a decade before. How can we explain this? And does this mean that domestic markets have not, in fact, developed? The paper argues that bond market growth has been held back by a sharp fall in investment rates, which has left firms with little need for bond borrowing. Even so, markets have developed in other ways, to such an extent that substantial amounts of foreign portfolio investment have begun to flow into ASEAN5 bonds. These developments have important ramifications. With the investor base growing and infrastructure investment likely to rise, ASEAN5 bond markets could expand rapidly over the next decade, holding out the prospect that the region could finally achieve "twin engine" financial systems.