Limited access to capital presents a critical challenge to growth and stability. Well-functioning markets insure that corporations efficiently mobilize capital for growth and that markets price risk well, so that valuable projects will be financed. Most importantly, countries that do not have access to equity capital face higher costs of capital and the costs often lead to segmentation of markets. Tepid markets inhibit investment. In this context, the World Bank, International Monetary Fund, and Brookings Institution are collaborating to address The Future of Domestic Capital Markets in Developing Countries.

The upcoming conference will address the challenges that countries face to develop and strengthen capital markets. Both developing and developed country markets face stiff challenges from globalization, technological changes, and weaknesses of corporate governance. In developed countries, markets are responding to these pressures by merging equities exchanges, while new Internet-based entrants have come into the market. Some equities exchanges have considered or embarked on demutualizations. In developing countries, globalization and technological change are placing smaller markets at a competitive disadvantage, and confronting policymakers and regulators with a choice—to join regional exchanges, to develop domestic capital markets, or to find other solutions.

The upcoming program will address the considerable challenges confronting emerging markets. Among them:

• To what extent should emerging market economies support the development of their own equities markets, or instead encourage regional alliances or even the listing of their companies in the large global markets?

• To what extent should emerging market countries support their own bond markets, first for government bonds and then for private firms?

• How have developing countries' capital markets contributed to or detracted from financial stability in these countries?