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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ReDIF This book is provided by Bank for International Settlements in its series BIS Papers with number
44 and published in 2008.
Sweta Saxena & Agustin Villar, 2008.
"Hedging instruments in emerging market economies,"
BIS Papers chapters,
in: Bank for International Settlements (ed.), Financial globalisation and emerging market capital flows, volume 44, pages 71-87
Bank for International Settlements.
[Downloadable!]
Katherine Hennings & Mário Mesquita, 2008.
"Capital flows to the Brazilian economy: 2003–07,"
BIS Papers chapters,
in: Bank for International Settlements (ed.), Financial globalisation and emerging market capital flows, volume 44, pages 103-119
Bank for International Settlements.
[Downloadable!]
Jorge Desormeaux & Karol Fernández & Pablo García, 2008.
"Financial implications of capital outflows in Chile: 1998–2008,"
BIS Papers chapters,
in: Bank for International Settlements (ed.), Financial globalisation and emerging market capital flows, volume 44, pages 121-142
Bank for International Settlements.
[Downloadable!]
Rakesh Mohan, 2008.
"Capital flows to India,"
BIS Papers chapters,
in: Bank for International Settlements (ed.), Financial globalisation and emerging market capital flows, volume 44, pages 235-263
Bank for International Settlements.
[Downloadable!]
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