Strengthening Financial Market Infrastructure in Emerging Economies: Lessons From Central Banking Operations

Abstract

The paper is an evaluation of how the financial market infrastructure has its links to central bank operations in the emerging economies, focusing on the structural limitations on financial system performance. It claims that the financial intermediation is still constrained by the inexistent gaps in payment systems, settlement facilities and domestic debt markets, albeit the current regulatory reforms. The study tests the interaction between infrastructural vulnerabilities and growing central bank remit options in the post-crisis policy space based on a qualitative synthesis of existing research on the impact of financial development, central banking, and institutional economics. The results are that effectiveness of central banking is organized by quality of underlying financial infrastructure, and that expansion of regulation has not solved systemic inefficiencies alone. Institutional readiness and infrastructural depth prove to be the two determinants of financial inclusion efforts and technological advances, though potentially useful. The paper comes up with a concluding observation indicating that the issue of financial market infrastructure is a predetermined factor of financial stability and progress in emerging economies and not a marginal aspect in the reform strategies.