Editor’s Note: This paper serves as the overview for a forthcoming book on Financial Sector Reforms and Regulation in Emerging Markets, eds. Masahiro Kawai and Eswar Prasad, Brookings Institution Press, 2010.
This paper provides an overview of the complex conceptual and practical challenges that emerging market economies face as they attempt to reform their frameworks for financial regulation. These economies are striving to balance the quest for financial stability with the imperatives of financial development and broader financial inclusion. I argue that these objectives can in fact reinforce one another. I also discuss aspects of macroeconomic policies and cross-border regulation that have implications for financial stability and the resilience of the financial sector in emerging markets.