Financial Market Development

In many of the growth countries it has been hitherto believed that the financial securities industry reform has to be gyrating around the commercial banking system. It is true that the commercial banking heavenss contribution to growth in economy in these exploitation countries much(prenominal) as cayenne and Mexico has over time grown inextricably connected to the development and growth of the otherwise related large(p) grocery store beas such as loveliness, government debts and the corpo reckon securities.Therefore, reform in the large(p) securities industry has hitherto emphasized the use of st enjoingies with the potential of not wholly strengthening but also deepening the uppercase commercialize placeplaces i.e. both the debt and equity commercialises. This paper seeks to highlight the general issues in the development in the bang-up markets such as GDP, interest rate spreads not only in the spheric context but also in the create countries thereby showing how the global trends have affected developing countries and these countries policy reaction so as attract, emulate and manage reform and development in internal capital markets. The paper finally highlights the comparative trends in domestic capital market with specific focus to land experience Chile and Mexico in regards to their participation in international capital market.Development of a country is striped by the GDP. However there are other factors which the UN has determine as measure for development such as life expectancy, rate of literacy etc. The UN has on the other developed a compound index called HDI which is a combination of the above named measures and is used to measure level of development. The global economy generally impacts on the economy, especially on the capital market of the developing countries. This means that governments cannot borrow because the narrates that lend are also confined in economic woes of recession. Further, if the lending states man age to lend, the interest rates are higher than recommended thus pushing thus tradi0ng a big box to the development of the developing countries (Boyk, 2006).In countering the global economic trend especially that of recession, the developing countries have resolved to internal borrowing through the use of corporate securities and bonds in the state owned corporations so as to raise the coin required to run these governments and initiate industrialization and other forms of development. Secondly, the governments in the developing countries have resolved to IPOs thus relinquishing their right in state owned organizations to the public to raise the much required funds. The practice in developing countries implies that financial integration facilitates growth of capital markets but it whitethorn negatively affect the volatility of share prices and efficiency of stock market especially when the capital market reforms are not suitable (Sheffrin, 2003).The primary(prenominal) questions that remain are how the developing countries can develop without depending on the already developed countries for assistance, can GDP alone be used to measure development in the developing countries? How can the developing countries manage to change their economies from being affected and greatly influenced by the global economic trends such as recession through their capital markets without necessarily adversely poignant the volatility of the stock market and share prices?Actually, the countries that qualify to categorize as developing can invest heavily in the capital market thereby using the funds raised from these investments in industrialization and other forms of sustaining developments. For instance, the countries such as Chile and Mexico have invested in the capital market top help catapult the development needed .but it has proven such a step if not carefully managed may lead to the summarise crashing of the capital markets. The two countries are simply a tale of capita l market crises.The 1994 Mexican peso crisis demonstrates a typical capital market crisis which sent shock waves through the global economy. In the 1980s, Chile suffered a similar crisis as Mexico because of the 1970s structural reforms characterized by a pedestal opportunity in the economy rampant privatization, and deregu- lation effort in a bid to realize a modern financial sector. In a bid to save themselves from the capital market crises, the countries use of predetermined deputize rates aimed to get rid of inflation collaborated with the resultant huge capital inflows intermediated by a fragile banking system to bring forth an exchange- rate overvaluation, a susceptible financial sector and the eventual crumpling of the currency