The emerging markets crisis has highlighted the need for properly developed financial markets in the developing world. Indeed, the Asian crisis might have followed a very different course if the countries affected had benefited at the time from better-developed government and corporate bond markets. Such markets are a means of mobilising savings, allocating capital, improving risk management and corporate governance. A year ago, the pool of domestic savings and investment money that such markets offer might have provided a better balance in a volatile situation where non-financial institutions were relying excessively on foreign and domestic bank loans. But securities markets do not spring up spontaneously.
Public policy is all important, particularly at the beginning of their development.
Governments supervise and regulate securities markets. At the same time, they participate in these markets. And they assure a regular supply of debt through planned auction schedules. Trust in financial markets largely depends on governments' maintaining high-disclosure standards, promoting transparency and preventing use or abuse of private information. Issues such as the advisability of closing economies to cross-border capital flows to avoid the risk of financial crisis, and of regulating capital markets will also be debated.