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Financial globalisation and emerging market capital flows

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  • Bank for International Settlements

Abstract

The focus of Deputy Governors when they met for their annual meeting at the BIS in January 2008 was on the great expansion of the role of emerging market economies (EMEs) in the international banking and capital markets. The deeper integration of EMEs is seen in the rapid growth in their gross non-official inflows and outflows . The papers written for this meeting - three background papers by BIS staff members and the country-specific papers prepared at the central banks of 19 EMEs - tackle several topics related to the growth in capital flows. Some issues were thrown into sharper focus by the severe market stress in the fourth quarter of 2008. The topics covered include: 1. The great increase in capital outflows of EMEs and growth in sovereign wealth funds, changes in the volatility of capital flows, and the challenges posed in analysing the risk exposures created by different forms of capital flow; 2. Exchange rate-sensitive capital flows and the implications of greater development and foreign participation in local currency debt markets; exchange rate volatility and foreign exchange market intervention; 3. Increased cross-border bank flows and their implications for financial stability, including credit growth, liquidity risks and currency mismatches; 4. Financial and capital account reforms. The trend has been towards capital account liberalisation with some recent reversals; 5. Pension funds and demographic trends. Ageing trends should lower national saving rates and reduce current account surpluses in EMEs but precautionary motives for saving plus related fiscal and asset accumulation policies could offset these effects, at least for a time. The rapid growth in pension fund assets appears to have help to deepened some financial markets. This could be enhanced if pension portfolios were diversified further, including internationally; 6. More liquid EME markets. A recurrent theme of the meeting was the deepening of local money and capital markets. In particular, the development of derivatives markets in the EMEs has been helped by the very strong growth the spot foreign exchange market for EME currencies and the increase in local currency domestic bonds outstanding.

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  • Bank for International Settlements, 2008. "Financial globalisation and emerging market capital flows," BIS Papers, Bank for International Settlements, number 44.
    • Handle: RePEc:bis:bisbps:44
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    References listed on IDEAS

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    Cited by:

    1. Elod Takats, 2010. "Was it credit supply? Cross-border bank lending to emerging market economies during the financial crisis," BIS Quarterly Review, Bank for International Settlements, June.
    2. Vithessonthi, Chaiporn & Tongurai, Jittima, 2013. "Unremunerated reserve requirements, exchange rate volatility, and firm value," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 23(C), pages 358-378.
    3. Edgar Demetrio Tovar García, 2012. "Financial globalization and financial development in Latin America," Revista Cuadernos de Economia, Universidad Nacional de Colombia, FCE, CID, August.
    4. Elod Takats, 2011. "Cross-border bank lending to emerging market economies," BIS Papers chapters, in: Bank for International Settlements (ed.), The global crisis and financial intermediation in emerging market economies, volume 54, pages 11-29, Bank for International Settlements.
    5. Ramon Moreno, 2011. "Policymaking from a "macroprudential" perspective in emerging market economies," BIS Working Papers 336, Bank for International Settlements.
    6. Škrabić Perić, Blanka & Rimac Smiljanić, Ana & Aljinović, Zdravka, 2018. "Credit risk of subsidiaries of foreign banks in CEE countries: Impacts of the parent bank and home country economic environment," The North American Journal of Economics and Finance, Elsevier, vol. 46(C), pages 49-69.
    7. Renzo Rossini & Zenon Quispe & Donita Rodriguez, 2011. "Capital flows, monetary policy and forex intervention in Peru," BIS Papers chapters, in: Bank for International Settlements (ed.), Capital flows, commodity price movements and foreign exchange intervention, volume 57, pages 261-274, Bank for International Settlements.
    8. Moreno, Ramón, 2011. "La formulación de políticas desde una perspectiva macroprudencial en economías emergentes," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 22, pages 21-40.
    9. Keith E. Maskus & Alessandro Peri & Anna Rubinchik, 2021. "Hiding Filthy Lucre in Plain Sight: Theory and Identification of Business-Based Money Laundering," CESifo Working Paper Series 9019, CESifo.
    10. Vithessonthi, Chaiporn & Tongurai, Jittima, 2013. "The perils of a central bank's capital control: How substantial is the effect on firm value?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 23(C), pages 111-135.

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