Post-crisis Lessons for EME Capital Markets

Abstract

The chapter presents policy lessons for the development of capital markets in emerging market economies (EMEs). It provides evidence on the link between sound macroeconomic fundamentals and capital market development based on the remarkable progress reached by EMEs in the pre-crisis period. The chapter shows how EME capital markets have been affected since the 2008 crisis and discusses the main common drivers with positive or negative impact on market deepening and the availability of long-term financing. The authors argue that the crisis brought significant challenges for the development of capital markets, requiring specific actions to consolidate government bond yield curves, to enhance the supply of domestic corporate debt, and to provide long-term financing for strategic sectors for growth such as small- and medium-sized enterprises, housing, and infrastructure.