The following essay will shortly define the key-terms Emerging-Market and Capital-Flows and subsequently show the historic development of Capital-Inflows to the defined countries. After the examination of the determinants of the International Capital Flows, the fourth part will deal with a topicality, the pending tampering of the US Federal Reserve’s Quantitative Easing and elaborate the consequences for the global capital-market situation.
Table of Contents
1. Introduction – Definition of key terms
2. Determinants of Capital Flows
3. Current situation and outlook
4. Conclusion
5. References
6. Appendixes
Research Objectives and Key Topics
This paper examines the dynamics of capital flows to Emerging Markets (EMs), focusing on their historical development, the primary determinants influencing these movements, and the potential impact of changing U.S. monetary policy on future financial stability in developing economies.
- Evolution of the definition and categorization of Emerging Markets.
- Analysis of push and pull factors driving international capital flows.
- Evaluation of the "Bonanza" phenomenon and its associated risks.
- Impact of the U.S. Federal Reserve's Quantitative Easing (QE) and the potential consequences of "tapering."
Excerpt from the Book
1. Introduction – Definition of key terms
The term Emerging Markets (hereafter: EM) was first introduced by Antoine van Agtmael in 1981. The World Bank economist searched for investors who were willing to lend capital for the newly issued “Third World Equity Fund”. After some unsuccessful efforts Agtmael tried to find a term which wasn’t “suggesting stagnation” but rather “progress, uplift and dynamism” (Agtmael 1981) and found it in today’s buzzword “Emerging Markets”. EMs nowadays are broadly defined as countries which are likely to reach a developed stage in the near and mid-future. In order to clarify which of the 193 states actually belongs to this group one has to analyze the prospects of these economies. This leads to a vast array of different outcomes. In the 1980s the South Asian Tigers became famous but failed to meet expectations during the Asian Debt Crisis of 1997-98. In 2001 the incumbent CEO of the investment bank Goldman Sachs coined the word BRIC which stands for Brazil, Russia, India and China, his favorites concerning catch-up growth of that time. During the years an “M” was added indicating Mexico, others included “ET” for East Europe and Turkey and in 2010 South Africa was honored with a capital “S”. The FTSE-Group even distinguishes between advanced and secondary emerging countries.
Summary of Chapters
1. Introduction – Definition of key terms: This chapter provides the conceptual foundation for the essay by defining Emerging Markets and identifying the specific countries analyzed based on IMF classifications.
2. Determinants of Capital Flows: This section explores the economic drivers behind capital movements, distinguishing between global push factors and domestic pull factors, and discusses the risks associated with rapid inflow "bonanzas."
3. Current situation and outlook: This chapter analyzes the effects of U.S. Quantitative Easing on Emerging Markets and explores the risks associated with the potential "tapering" of these stimulus measures.
4. Conclusion: The concluding chapter summarizes the study's findings on the volatility of capital flows and the potential irony of how successful economic growth in EMs could lead to increased risks as U.S. monetary policy normalizes.
5. References: A comprehensive list of academic sources and economic reports used to support the research.
6. Appendixes: Supplementary data providing a detailed summary of literature on capital flow determinants and key economic indicators for the studied countries.
Keywords
Emerging Markets, Capital Flows, Quantitative Easing, Taper-tantrum, BRIC, Foreign Direct Investment, Portfolio Investment, Monetary Policy, Global Push Factors, Economic Growth, Financial Crisis, Bonanza, Fragile Five, Sovereign Debt, Market Volatility.
Frequently Asked Questions
What is the core focus of this research paper?
The paper examines the historical and current trends of capital flows into Emerging Markets, analyzing how global monetary policies and domestic economic factors influence these financial movements.
What are the central themes discussed in the work?
Key themes include the definition and evolution of Emerging Markets, the classification of determinants for capital flows, the "Bonanza" phenomenon, and the impact of the U.S. Federal Reserve’s policies on developing economies.
What is the primary research objective?
The goal is to understand the drivers of capital inflows to EMs and assess how a potential shift in U.S. monetary policy (Quantitative Easing) might affect the stability and growth of these nations.
Which scientific methods were utilized in this study?
The author employs a literature-based analytical approach, reviewing existing economic studies and utilizing statistical data (charts and indicators) from organizations like the IMF, World Bank, and Federal Reserve.
What topics are covered in the main body of the text?
The main body covers the terminology of Emerging Markets, theoretical and empirical determinants of capital flows (push vs. pull factors), and an in-depth analysis of the "taper-tantrum" risks following U.S. policy changes.
Which keywords best characterize this work?
Primary keywords include Capital Flows, Emerging Markets, Quantitative Easing, Taper-tantrum, and Financial Stability.
What are the "Fragile Five" countries mentioned in the analysis?
The "Fragile Five" refers to a specific group of countries—Brazil, India, Indonesia, South Africa, and Turkey—identified as being particularly vulnerable to currency depreciation and capital outflows due to high current-account deficits.
How does the "delayed overshooting puzzle" relate to U.S. monetary policy?
The term, introduced by Eichenbaum and Evans, describes the phenomenon where the appreciation of the Dollar following a contradictory monetary policy shock peaks only 24 months after the actual event occurs.
What is a "Capital Flow Bonanza"?
A "Capital Flow Bonanza" refers to periods of extreme positive eruptions of capital inflows to EMs, which often lead to higher growth and asset prices but are historically temporary and frequently precede financial crises.
- Citation du texte
- Dominik Hueller (Auteur), 2014, Current Situation of Capital-Flows to Emerging-Markets, Munich, GRIN Verlag, https://www.grin.com/document/284945
