Handbook of Critical Issues in Finance
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Handbook of Critical Issues in Finance

Edited by Jan Toporowski and Jo Michell

This vital new Handbook is an authoritative volume presenting key issues in finance that have been widely discussed in the financial markets but have been neglected in textbooks and the usual compilations of conventional academic wisdom.
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Chapter 16: Financial markets in developing countries

Noemi Levy Orlik


There is a wide discussion regarding financial markets and financing production that adopts particular features in developing countries. The main argument of mainstream economics is that financial markets are mere financial intermediaries that guarantee finance at full employment economic activity, diminishing (or not acknowledging) the negative effects of capital mobility and financial gains. Financial markets solely intermediate between ‘representative’ agents or firms exchanging ‘resources’ (Minsky, 1996), so that issues of differential access to liquidity, that is, the rationale for financial intermediation, are not present in mainstream economics. In the heterodox stream of thought, the banking structure is the main provider of economic growth finance, putting forward different views on the relation between financial markets, banking structure and non-financial enterprises. Keynes ([1936] 1964) attached to financial non-banking institutions the function of providing long-term finance that annuls short-term bank debts, while Minsky (1975) argued that security markets increase the liquidity of non-liquid assets and endogenize private money supply.

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