Local Currency Bond Markets and International Capital Flows

Developed, deep and effectively regulated local currency bond markets have the potential to enhance global financial stability and therefore underpin the stability of the international monetary system. The predominant objective of initiatives for developing these markets is to enhance financial stability. Within the framework of the French G20 presidency 2011, the working group on stabilizing the International Monetary System, co-chaired by Germany and Mexico has evaluated the further development of domestic bond markets, in particular against the backdrop of increasingly volatile capital flows, as a long-term measure for enhancing the shock-absorbing capacities of financial systems.

Second, and from a more practical perspective, there is a shared objective to further streamline technical assistance and coordinated activities on a worldwide basis. Therefore, the workshop will discuss systematic approaches to better identify those countries or country groups where technical assistance is proving the most promising and effective. What are the alternative approaches and criteria for categorizing countries with different stages of development and fi-nancial structures? What factors have proved to be the main obstacles to developing local cur-rency bond markets?