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Reforming the International Financial System for Development$
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Jomo Kwame Sundaram

Print publication date: 2011

Print ISBN-13: 9780231157643

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231157643.001.0001

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Global Liquidity and Financial Flows to Developing Countries

Global Liquidity and Financial Flows to Developing Countries

New trends in emerging markets and their implications1

(p.25) 2 Global Liquidity and Financial Flows to Developing Countries
Reforming the International Financial System for Development

C.P. Chandrasekhar

Columbia University Press

This chapter considers some of the implications of recent trends in global liquidity and financial flows to emerging markets before the current financial and economic crisis, with particular emphasis on the strong revival in capital flows to developing countries after the slump following the 1997–1998 financial crisis in East Asia. It argues that following liberalization of financial markets, the resurgence in cross-border flows can be better explained by supply-side factors than the financing requirements of recipient countries. It explains the significance of foreign investment as a source of corporate finance and discusses some of the lessons that can be learned from the sub-prime mortgage crisis in the United States. Finally, it evaluates the consequences of curbing the monetized deficit in order to appease financial capital.

Keywords:   liquidity, emerging markets, economic crisis, capital flows, developing countries, financial crisis, financial markets, supply-side factors, foreign investment, sub-prime mortgage crisis

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