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Capital Market Inflation in Emerging Markets: the Cases of Brazil and South Korea

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  • Bruno Bonizzi

    (SoAS)

Abstract

This paper investigates the dynamics of capital markets in emerging markets in a period of financial integration. It takes the case of Brazil and South Korea, two key emerging markets in the global economy, to assess the relationship between capital flows and equity prices. This is analysed through Jan Toporowski’s theory of “capital market inflation”, which explains the movements of equity prices in relation to the inflows of funds into the capital market. The main argument put forward is that foreign capital inflows into the emerging equity markets have substantially contributed to create the excess liquidity that gives rise to a process of capital market inflation. This contributes both to extend Toporowski’s theory to the context of emerging financially open countries, and to give a new perspective to the debates over financial globalisation by proposing the theory of capital market inflation as a framework to understand the impacts of capital flows to emerging markets. The empirical evidence available from Brazil and South Korea suggests that this is a consistent and instructive framework of analysis.

Suggested Citation

  • Bruno Bonizzi, 2015. "Capital Market Inflation in Emerging Markets: the Cases of Brazil and South Korea," PSL Quarterly Review, Economia civile, vol. 68(273), pages 115-150.
  • Handle: RePEc:psl:pslqrr:2015:22
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    Cited by:

    1. Jian Xu & Jae-Woo Sim, 2018. "Characteristics of Corporate R&D Investment in Emerging Markets: Evidence from Manufacturing Industry in China and South Korea," Sustainability, MDPI, Open Access Journal, vol. 10(9), pages 1-18, August.
    2. Yilmaz Akyüz, 2014. "Internationalization of Finance and Changing Vulnerabilities in Emerging and Developing Economies," UNCTAD Discussion Papers 217, United Nations Conference on Trade and Development.
    3. Dögüs, Ilhan, 2017. "Wage dispersion and pension funds: Financialisation of non-financial corporations in the USA, 1966-2013," Discussion Papers 63, University of Hamburg, Centre for Economic and Sociological Studies (CESS/ZÖSS).

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    More about this item

    Keywords

    Finance; Asset price inflation; Foreign investors;
    All these keywords.

    JEL classification:

    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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