By Sam van de Schootbrugge 26-05-2021
In: deep-dives | Global

How Have Global Capital Flows Changed?

(4 min read)
Resize text:


The Covid-19 crisis triggered a sharp reversal of capital flows to Emerging Market Economies (EMEs). Also known as a sudden stop, this withdrawal of foreign funds can significantly damage economies. However, healthier growth prospects, unconventional monetary policy, expansionary fiscal policy, and large reserve buffers helped EMEs navigate the pandemic better than during previous sudden stops. A new BIS working paper suggests changing capital flow trends over the last decade may also have helped. In particular, the authors find:

The rise of EME investors and the growth of local currency bond markets have helped to diversify EMEs’ investor base.
EME banks have increased cross-border lending, and the share of EMEs’ liability represented by portfolio debt has risen steadily since 2008.
The frequency of bank-related capital flow surges into EMEs has fallen, and gross inflows into Advanced Economies (AEs) are now more volatile than to EMEs.

TO READ THIS DEEP DIVE
SUBSCRIBE TO MACRO HIVE PRIME

£39/month thereafter

For access to our Slack Chat Room, where we discuss all things markets with our researchers and subscribers

START YOUR FREE TRIAL


MOST READ

Homebuilders Are in A Sweet Spot (5 min read)

By John Tierney | Jun 03, 2021
The latest housing data was a source of both relief and worry. The relief is because slowing home sales perhaps indicate the US is...

2H Outlook: The Pause That Refreshes (10 min read)

By Jay Pelosky | Jun 01, 2021
As we approach midyear, Covid Speed’s breakneck pace seems to have slowed. Cross-asset markets have paused, with stable stocks, bonds...

Be Careful, Inflation Expectations Are Unanchored! (6 min read)

By Sam van de Schootbrugge | Jun 02, 2021
The Covid-19 crisis triggered a sharp reversal of capital flows to Emerging Market Economies (EMEs). Also known as a sudden stop...

PREMIUM CONTENT

Precious Metals Poised for a Historic Rally (5 min read)

By John Butler | May 25, 2021
Summary Multiple fundamental factors are coming together…

US