In cross-economy comparisons (such as the graphs on pages 43 and 95 of this volume), it is notable that both banking and bond markets tend to be larger, relative to GDP, in rich countries,2 although even some rich countries still have small bond markets. As economies mature, banking markets tend to become developed before bond markets. Yoshitomi and Shirai (2001) and Shirai (2001) suggest several reasons for this: in poor countries, individuals have a greater preference for liquid short-term bank deposits; institutional investors are underdeveloped or non-existent; few companies are sufficiently large and reputable to issue bonds; and the requisite informational, legal and judicial infrastructure is not.
