Policy and institutional considerations in equity market development

This document provides A.I.D. policymakers with a conceptual framework for evaluating capital and equity market development activities in host countries. Chapter I briefly discusses the importance of equity markets to the growth of the private sector in industrialized and developing countries, and describes the various segments of the financial markets of industrialized countries. A brief history of the activities undertaken by A.I.D. and other international donors to promote the development of financial markets is provided in Chapter II. Chapter III discusses conditions that tend to deter the growth of the private sector and the development of equity markets in the Third World. The effects of particular macroeconomic policies, political conditions, and the legal and regulatory environment on the growth of the private sector and the development of financial markets are described using examples from various countries. Chapter IV considers approaches A.I.D. might take to promote equity markets (by strengthening the institutional framework and increasing the supply of and the demand for securities), and examines the appropriateness of A.I.D. policies and resources for such assistance; included are criteria for targeting such assistance. (Author abstract, modified)