Financial Development in Latin America : Big Emerging Issues, Limited Policy Answers

This paper argues that the dominant policy paradigm on financial development is increasingly insufficient to address big emerging issues that are particularly relevant for financial systems in Latin America. This paradigm was shaped over the past decades by a fundamental shift in thinking toward market-based financial development and a complex process of financial crises interpretation. The result has been a richly textured policy paradigm focused on promoting financial stability and the convergence to international standards. It argues, however, that there is a growing dissonance between the current paradigm and the emerging issues, which is illustrated by discussing challenges in three areas: stock markets, small and medium enterprise loans, and defined-contribution pension funds. The paper concludes that the dominant policy paradigm is ill-suited to provide significant guidance in relation to the big emerging issues. It emphasizes the need to take a fresh look at the evidence, improve the diagnoses, revisit expectations, and revise the paradigm.

Bibliographic Details

Main Authors:	Gozzi, Juan Carlos, de la Torre, Augusto, Schmukler, Sergio L.
Language:	English
Published:	World Bank, Washington, DC 2006-07
Subjects:	ACCOUNTING, ADVERSE EFFECT, ALLOCATION OF RESOURCES, ASSET BUBBLES, ASYMMETRIC INFORMATION, BALANCE OF PAYMENTS, BALANCE SHEET, BALANCE SHEETS, BANK DEPOSITS, BANKING CRISES, BANKING SUPERVISION, BENCHMARK, BENCHMARKS, BONDS, BORROWING, CAPITAL ACCOUNT, CAPITAL ACCOUNTS, CAPITAL FLOW VOLATILITY, CAPITAL INFLOWS, CAPITAL LOSSES, CAPITAL MARKET, CAPITAL MARKET DEVELOPMENT, CENTRAL BANK, CENTRAL BANK INDEPENDENCE, CONSUMERS, CONSUMPTION SMOOTHING, CONTAGION, CORPORATE GOVERNANCE, CREDIT CEILINGS, CREDITOR RIGHTS, DEBT, DEBT CRISIS, DEPOSITS, DEVALUATION, DEVELOPING COUNTRIES, DEVELOPMENT POLICY, DOMESTIC CAPITAL, DOMESTIC CAPITAL MARKETS, DOMESTIC CURRENCY, DOMESTIC FINANCIAL MARKETS, DOMESTIC FINANCIAL SYSTEM, DOMESTIC INVESTORS, DOMESTIC MARKETS, DOMESTIC POLICIES, DOMESTIC STOCK MARKETS, ECONOMIC CONTRACTION, ECONOMIC GROWTH, ECONOMIC SIZE, EMERGING ECONOMIES, EMERGING MARKET, EMERGING MARKETS, EMPIRICAL EVIDENCE, EQUITY MARKETS, EXCHANGE RATE, EXCHANGE RATE FLEXIBILITY, EXCHANGE RATE POLICY, EXCHANGE RATE REGIMES, EXCHANGE RATES, EXOGENOUS SHIFTS, FINANCIAL CONTRACTS, FINANCIAL CRISES, FINANCIAL CRISIS, FINANCIAL DEPTH, FINANCIAL DEREGULATION, FINANCIAL DEVELOPMENT, FINANCIAL FRAGILITY, FINANCIAL GLOBALIZATION, FINANCIAL INTERMEDIARIES, FINANCIAL LIBERALIZATION, FINANCIAL MARKET, FINANCIAL MARKET DEVELOPMENT, FINANCIAL MARKET LIBERALIZATION, FINANCIAL MARKETS, FINANCIAL OPENNESS, FINANCIAL POLICIES, FINANCIAL REFORM, FINANCIAL REPRESSION, FINANCIAL SECTOR, FINANCIAL SECTOR REFORM, FINANCIAL SECTORS, FINANCIAL SERVICES, FINANCIAL STABILITY, FINANCIAL SYSTEM, FINANCIAL SYSTEMS, FLEXIBLE EXCHANGE RATE, FOREIGN CURRENCY, FOREIGN EXCHANGE, FOREIGN INVESTORS, GDP, GLOBALIZATION HAZARD, GROSS DOMESTIC PRODUCT, HIGH INTEREST RATES, HIGH VOLATILITY, INFLATION, INFLATION TARGETING, INSIDER TRADING, INSURANCE, INSURANCE POLICIES, INTEREST RATES, INTERNATIONAL CAPITAL, INTERNATIONAL CAPITAL MARKETS, INTERNATIONAL FINANCIAL ARCHITECTURE, INTERNATIONAL FINANCIAL INTEGRATION, INTERNATIONAL FINANCIAL MARKETS, INTERNATIONAL INVESTORS, INTERNATIONAL MARKETS, INTERNATIONAL RESERVES, INTERNATIONAL STANDARDS, INVISIBLE HAND, LATIN AMERICAN, LIQUIDITY, LOCAL CURRENCY, LOCAL STOCK MARKET, MACROECONOMIC POLICIES, MARKET CAPITALIZATION, MARKET COMPETITION, MARKET DISCIPLINE, MARKET INTEGRATION, MARKET ORIENTATION, MORAL HAZARD, MULTIPLE EQUILIBRIA, NEGATIVE EXTERNALITIES, OVERVALUATION, PER CAPITA INCOME, POLICY RESEARCH, PRICE STABILITY, PRIVATE SECTOR, PROPERTY RIGHTS, PUBLIC DEBT, PUBLIC FINANCES, REAL EXCHANGE, REAL EXCHANGE RATE, REFORM AGENDA, REGULATORY ENVIRONMENT, SAFETY NETS, SAVINGS, SECURITIES, SECURITIES MARKETS, SETTLEMENT SYSTEMS, SHORT-TERM DEBT, STOCK MARKET, STOCK MARKETS, STOCKS, TRANSPARENCY, VALUE ADDED, WEALTH,
Online Access:	http://documents.worldbank.org/curated/en/2006/07/6913982/financial-development-latin-america-big-emerging-issues-limited-policy-answers https://hdl.handle.net/10986/8398
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