Capital Flows, Asset Prices and Output in Emerging Market Economies

2015 ◽  
Vol 50 (1) ◽  
pp. 1-20
Author(s):  
Ranjanendra Narayan Nag ◽  
Sayan Baksi ◽  
Sayantan Bandhu Majumder
Keyword(s):  
Capital Flows ◽  
Asset Prices ◽  
Emerging Market ◽  
Emerging Market Economies ◽  
Market Economies

Harinder S. Kohli (ed.). Growth and Development in Emerging Market Economies: International Private Capital Flows, Financial Markets and Globalisation. New Delhi: Sage Publication 2008. 369 pages. Hardbound. Indian Rs 695.00.

2008 ◽  
Vol 47 (3) ◽  
pp. 304-305
Author(s):  
Henna Ahsan
Keyword(s):  
Capital Flows ◽  
Growth And Development ◽  
Global Economy ◽  
Emerging Market ◽  
Balance Sheet ◽  
Emerging Market Economies ◽  
New Delhi ◽  
Infrastructure Development ◽  
Market Economies ◽  
Emerging Market Countries

The book discusses the different experiences in Asia and Latin America, while covering the closely related areas under the purview of Emerging Market Economies (EMEs). The first chapter, “Introduction and Overview” has written by Harinder S. Kohli gives an excellent review of the existing literature on the subject. The book discusses six related topics which include nine papers presented at the Emerging Markets Forum Meeting held in Jakarta, Indonesia, in September 2006. The book highlights the main factors of growth and development in Emerging Market Economies (EMEs) now closely related with international capital flows, development of financial market, the countries’ ability to integrate successfully with the global economy through trade and investment and their ability to forge public-private partnerships including infrastructure development. Chapter 2, of the book is an article titled “Global Imbalances, Oil Revenues and Capital Flows to Emerging Market Countries” by Jack Boorman explains the favourable global environment and its impact on capital flows to Emerging Market Countries (EMCs). The EMCs got advantage from this benign global economic environment, such as high economic growth rate, increase in exports, better national balance sheet and increase in foreign exchange reserves, but due to high oil prices the situation has been changed.

Globalization in the World of Finance: An Analytical History

2006 ◽  
Vol 6 (1) ◽  
pp. 1850081 ◽  
Author(s):  
Dilip K. Das
Keyword(s):  
Capital Markets ◽  
Capital Flows ◽  
Financial Integration ◽  
Emerging Market ◽  
Insurance Companies ◽  
Emerging Market Economies ◽  
Financial Globalization ◽  
Middle Income ◽  
Market Economies ◽  
Bretton Woods

One of the many definitions of financial globalization is integration of domestic financial system of a country with the global financial markets and institutions. Enabling framework of financial globalization essentially includes liberalization and deregulation of the domestic financial sector as well as liberalization of the capital account. As economies progressively integrate globally, pari passu the financial structures of markets and the world of finance change. Financial globalization cannot be considered a novel phenomenon. Trans-country capital movements are centuries old. The oil shock of 1973 and the collapse of the Bretton Woods system, both of these developments were momentous and were responsible for laying the foundation of the contemporary era of financial globalization. After the collapse of the Bretton Woods system, some middle-income developing economies began to liberalize and open up for greater capital mobility, while keeping an autonomous control over their monetary policy. Advances in IT and computer technology are cited as one of the most important factors driving and supporting financial globalization. Transnational corporations (TNCs) also helped in global financial integration. They expanded their networks by merging with or acquiring other national and international firms. The prime movers in financial globalization are governments, borrowers, investors, and financial institutions. Each one of these market participants propelled economies towards financial integration in a proactive manner. Financial globalization has caused dramatic changes in the structure of national and international capital markets. The most significant change in the capital markets was in the banking system, which went through a process of dis-intermediation. This was a market transformation of fundamental nature. Contagions and crises are the downsides of financial globalization. Economic and financial crises of the 1990s portend to the fact that financial globalization is not a win-win game, and that it can potentially lead to serious disorder and high cost in terms of bank failures, corporate bankruptcies, stock market turbulence, depletion of foreign exchange reserves, currency depreciation and increased fiscal burden. A unique characteristic of globalized financial markets is reversal of capital flows when market perception regarding the creditworthiness of the borrowing entity changes. Cross-country financial flows to the emerging market economies were low, at during the mid-1970s. They increased at a healthy clip during the decades of 1980s and 1990s, peaking in 1997. They suffered a sharp decline after that because of the Asian and Russian financial and economic crises. The composition of external capital underwent a dramatic transformation during this period. Official flows either stagnated or declined. As a result their relative significance in global capital flows dwindled. In their place, private capital flows became the major source of external finance for a good number of emerging market economies. FDI became an important and dependable source of finance for the emerging markets and other middle-income economies during the decade of the 1980s and 1990s. Portfolio investment in stocks and bond markets also increased substantially. Global institutional investors found this channel of investment functional and profitable. Mutual funds, insurance companies, and pension funds channeled large amounts through portfolio investment into the emerging market economies. As financial globalization progressed, presence of international financial intermediaries has expanded considerably. This applies more to international commercial banks than to investment banks, insurance companies and mutual funds. It is incorrect to say that their global expansion has been uniform because this has occurred unevenly. International bond issuance activity by emerging market economies recorded a sharp spurt in 1993. Emerging market economies began using ADRs and GDRs for raising capital from the global capital markets in 1990 in a small way.

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