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Are global imbalances due to financial underdevelopment in emerging economies?

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  • Diego Valderrama

Abstract

This Economic Letter presents recent research on a new explanation for both the export of savings and the import of equity by emerging countries: their level of underdevelopment of the financial sector compared to that of more advanced countries. Specifically, financial underdevelopment in emerging markets can lead to both over saving by domestic agents and undervaluation of domestic firms, which encourages international investors to purchase equity there.

Suggested Citation

  • Diego Valderrama, 2008. "Are global imbalances due to financial underdevelopment in emerging economies?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue apr11.
    • Handle: RePEc:fip:fedfel:y:2008:i:apr11:n:2008-12
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    File URL: http://www.frbsf.org/publications/economics/letter/2008/el2008-12.pdf
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    References listed on IDEAS

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    1. Enrique G. Mendoza, 2007. "Financial Integration, Financial Deepness and Global Imbalance," 2007 Meeting Papers 746, Society for Economic Dynamics.
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    Cited by:

    1. James B. Ang & Jakob B. Madsen, 2012. "Risk capital, private credit, and innovative production," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(4), pages 1608-1639, November.
    2. Jakob B. MADSEN & James B. ANG, 2014. "Finance-Led Growth in the OECD since the 19th century: How Does Financial Development Transmit To Growth?," Economic Growth Centre Working Paper Series 1408, Nanyang Technological University, School of Social Sciences, Economic Growth Centre.

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