Capital Flows

Net Capital Flows Charts
Net Capital Flows Charts

CEIC Gallery/Hot Topics/Global Database - April 13, 2016 Summary Since the end of the Global Financial crises, emerging markets have benefited considerable flow of foreign capital. Developing economies in Asia, Latin America, Europe and Africa became attractive places for the global financial capital as these countries provided relatively low risk and higher rate of return compared to developed countries where central banks’ policy measures to boost the economies pushed interest rates down. However, as United States’ economy turned to recovery and Federal Reserve has taken actions to end its stimulus program since the end 2013, the capital inflow to emerging markets has slowed down. Moreover, while Fed’s policy measures such as operation twist caused a slowdown in foreign capital flow to emerging markets, the QE tapering since December 2013 and interest rate hike in December 2015 triggered rapid capital flight out of the emerging markets and threatened their currency and financial stability. Countries in Asia and Latin America have suffered the largest currency depreciation and foreign reserve drain since the crises in 1990s. As a result, developing countries’ central banks have been forced to react on the capital flight and currency devaluation by increasing policy rates, which on the other hand has slowed down the economic growth in these countries. CEIC’s “Capital Flows” illustrates the financial flows in and out of some of the key developing markets. The charts include net flows of portfolio and other investment according to IMF’s Balance of Payments, Manual Sixth. Data are presented as four-quarter rolling sums. Net Capital Flows Portfolio Investment Other Investment Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog

15th April 2016 Capital Flows

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