Domestic Bond Market Development Batten, Jonathan A. Szilagyi, Peter G 2012-03-30T07:12:33Z 2012-03-30T07:12:33Z 2007-09-30
dc.description.abstract A two-tiered approach to financial market development aimed at both bank and bond market reform would also be complementary to longer term economic development, provided services could be delivered through efficient financial and legal institutions (Chakraborty and Ray 2006) and there was strong protection for investors and sound fiscal and monetary policy management by government (Burger and Warnock 2006b). Historically, local issuers tend to issue in the major currencies (U.S. dollars, yen, and euro), and then either swap the proceeds into local currency (interest rate parity theory suggests this should deliver funds equivalent in yield to what is available in the domestic market) or, more often, sell the foreign currency proceeds in spot foreign exchange markets, leaving the repayment cash flows unhedged. Chakraborty and Ray (2006) recently established that although stronger bank monitoring helps to resolve information asymmetries and agency concerns, it is the efficiency of financial and legal institutions that influences growth outcomes, whether there is a bank- or a market-based financial system. Among them are the need for enabling regulation, including reform of withholding and other foreign investor taxes (Lejot, Arner, and Liu 2006); continuing reform of corporate governance, which includes better creditor rights, bankruptcy procedures, and contract enforcement (Beck, Levine, and Loayza 2000; Burger and Warnock 2006); and strong financial infrastructure for better information disclosure, the establishment of reliable credit ratings (Kisselev and Packer 2006) and robust benchmark yield curves The securities market is largely self-regulated through organizations such as the Korea Securities Dealers Association, the Korea Exchange, and the Korea Securities Depository, and four local agencies assign credit ratings: Korea Investor Service (a Moody's affiliate), Korea Ratings (a Fitch affiliate), National Information & Credit Evaluation, and Seoul Credit Rating & Information. This process began in 2004 with the introduction of the Korea Interbank Offered Rate (KORIBOR), which should become the benchmark interest rate for short-term financing for banks and may become a reference rate for bond or swap transactions. The first phase of the Foreign Exchange Liberalization Plan (2002 2005) increased won funding limits for nonresidents and raised the ceiling on the amount of residents' foreign borrowings requiring notification. The 2005 merger of the Korea Stock Exchange, the Korean Securities Dealers Automated Quotation stock market, and the Korea Futures Exchange into the Korea Exchange is expected to upgrade the competitiveness of the nation's trading system for a variety of financial products, including stocks, bonds, options, and other derivatives. There appears to be a natural ordering to the tasks involved: first, establish benchmark bonds and indices; second, develop a diverse derivatives market; third, systematically lengthen the bond market's maturity profile; and fourth, build and develop over-the-counter capability and price structures for derivatives and other complex financial instruments. In developed countries, as banks have become increasingly cautious about extending credit, a gradual process of disintermediation has been occurring in historically bank-oriented financial regimes, fed by considerable regulatory efforts directed at market liberalization. en
dc.identifier.citation World Bank Research Observer
dc.identifier.issn 1564-6971
dc.publisher World Bank
dc.relation.ispartofseries World Bank Research Observer
dc.rights CC BY-NC-ND 3.0 IGO
dc.rights.holder World Bank
dc.subject banking markets
dc.subject bond market reform
dc.subject bond markets
dc.subject bonds
dc.subject capital flows
dc.subject corporate savings
dc.subject domestic bond
dc.subject domestic bond market
dc.subject domestic bond market development
dc.subject emerging market
dc.subject emerging market economies
dc.subject financial crisis
dc.subject financial market
dc.subject financial markets
dc.subject foreign borrowers
dc.subject global bond
dc.subject global bond market
dc.subject local bond market
dc.subject macroeconomic stability
dc.subject regional bond markets
dc.title Domestic Bond Market Development en
dc.title.alternative The Arirang Bond Experience in Korea en
dc.type Journal Article en
dc.type Article de journal fr
dc.type Artículo de revista es
dspace.entity.type Publication
dspace.entity.type Publication
okr.doctype Journal Article
okr.globalpractice Finance and Markets
okr.globalpractice Trade and Competitiveness 2
okr.language.supported en
okr.pagenumber 165
okr.pagenumber 195
okr.pdfurl wbro_22_2_165.pdf en
okr.peerreview Academic Peer Review
okr.region.administrative East Asia and Pacific Korea, Republic of Korea, Democratic People's Republic of Singapore Indonesia
okr.topic Finance and Financial Sector Development :: Debt Markets
okr.topic Private Sector Development :: Emerging Markets
okr.volume 22
relation.isJournalIssueOfPublication f4ccd528-c9d4-42fd-8c1a-1b9788b16e2d
relation.isJournalOfPublication 9e5fbe82-492f-4142-8378-17d50245d9de
relation.isJournalVolumeOfPublication ae9dcaa4-e2d9-4e9a-b9f4-3ec74d20184b
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