Asian Development Bank Institute

Although the growing literature on the importance of finance in economic growth contrasts bank-based financial systems with market-based financial systems, little attention has been paid to the role of the bond market. Correspondingly the role of the bond market has been very small relative to that of the banking system or equity markets in most Asian emerging economies. We argue that the underdevelopment of Asian bond markets has undermined the efficiency of these economies and made them significantly more vulnerable to financial crises....