Book
From Capital Surges to Drought

Seeking Stability for Emerging Economies

This collection analyses the new trends in capital flows to emerging markets since the Asian crisis, their determinants and policy implications. It explains why such flows have declined so dramatically in recent years, emphasising both structural and cyclical factors. Senior bankers, regulators and academics explain the behaviour of different players. The book breaks new ground by detailing how such behaviour has contributed to the decline of flows and their volatility. Suggestions are made for coping mechanisms which developing countries could adopt to deal with crisis situations; what measures should be taken at the national and international levels to make recipient countries less vulnerable to international financial instability; how such instability can be reduced; and what can be done in the source countries to encourage larger more stable capital flows to developing countries.

Table of contents
  1. Capital Flows to Emerging Economies: Does the Emperor Have Clothes?
    Stephany Griffith-Jones
  2. Financial Crises and National Policy Issues: An Overview
    Ricardo Ffrench-Davis
    More Working Paper | Financial Crises and National Policy Issues
  3. Part I: The Supply of Capital
    Liquidity Black Holes: Why Modern Financial Regulation in Developed Countries is making Short-Term Capital Flows to Developing Countries Even More Volatile
    Avinash Persaud
    More Working Paper | Liquidity Black Holes
  4. Part I: The Supply of Capital
    International Bank Lending: Water Flowing Uphill?
    John Hawkins
    More Working Paper | International Bank Lending
  5. Part I: The Supply of Capital
    Bank Lending to Emerging Markets: Crossing the Border
    David Lubin
    More Working Paper | Bank Lending to Emerging Markets
  6. Part I: The Supply of Capital
    Derivatives, the Shape of International Capital Flows and the Virtues of Prudential Regulation
    Randall Dodd
    More Working Paper | Derivatives, the Shape of International Capital Flows and the Virtues of Prudential Regulation
  7. Part I: The Supply of Capital
    Ratings since the Asian Crisis
    Helmut Reisen
    More Working Paper | Ratings since the Asian Crisis
  8. Part I: The Supply of Capital
    Proposals for Curbing the Boom-Bust Cycle in the Supply of Capital to Emerging Markets
    John Williamson
    More Working Paper | Proposals for Curbing the Boom-Bust Cycle in the Supply of Capital to Emerging Markets
  9. Part I: The Supply of Capital
    Corporate Risk Management and Exchange Rate Volatility in Latin America
    Graciela Moguillansky
    More Working Paper | Non-Financial Corporate Risk Management and Exchange Rate Volatility in Latin America
  10. Part I: The Supply of Capital
    The New Basel Capital Accord and Developing Countries: Issues, Implications and Policy Proposals
    Stephany Griffith-Jones, Stephen Spratt
    More Working Paper | The New Basel Capital Accord and Developing Countries
  11. Part I: The Supply of Capital
    The Instability of the Emerging Market Assets Demand Schedule
    Valpy Fitzgerald
    More Working Paper | The Instability of the Emerging Market Assets Demand Schedule
  12. Part II: National Policy Responses
    Capital-Account and Counter-Cyclical Prudential Regulations in Developing Countries
    José Antonio Ocampo
    More Working Paper | Capital-Account and Counter-Cyclical Prudential Regulations in Developing Countries
  13. Part II: National Policy Responses
    How Optimal are the Extremes?: Latin American Exchange Rate Policies During the Asian Crisis
    Ricardo Ffrench-Davis, Guillermo Larraín
    More Working Paper | How Optimal are the Extremes?
  14. Part II: National Policy Responses
    Countercyclical Fiscal Policy: A Review of the Literature, Empirical Evidence and Some Policy Proposals
    Carlos Budnevich
    More Working Paper | Countercyclical Fiscal Policy
  15. Part II: National Policy Responses
    Financial Regulation and Supervision in Emerging Markets: The Experience of Latin America since the Tequila Crisis
    Barbara Stallings, Rogerio Studart
    More Working Paper | Financial Regulation and Supervision in Emerging Markets
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Endorsements

'The project comprises of numerous other papers that researchers have contributed to this huge and far-impacting report, soon to be published as a book. It will provide an in-depth analysis of new trends in the supply of vehicles of capital flows and their determinants, as well as an evaluation of national policies to reduce volatility, which is basically a reflection of shortcomings in the countries' development process and the weakness of their mechanisms for regulating transactions that have opened the way for unusual financial crises in those systems.' - Roma Rana, United Nations Chronicle

'If one ranks subjects by the ratio of their importance to human welfare over the extent of understanding of them among the educated public, the subject of capital mobility and capital controls must come near the top of the list. This book is a marvellously lucid and accessible set of essays from some of the leading experts in the field - who unlike many other contributors to the literature, do not assume that what is best for finance is best for the whole economy and society.'- Robert Hunter Wade, Professor of Political Economy, Development Studies Institute, London School of Economics

'This book is outstanding in combining economic analysis with policy implications at the national and international level. It looks at capital flows to emerging markets from different perspectives and provides a comprehensive overview of problems, issues and possible solutions without getting lost in economic jargon. This seminal work must be read by anyone concerned about international development and the future of the world economy.' - Bernhard G. Gunter, EPIAM Project Director, New Rules for Global Finance Coalition, Washington DC

'This edition contains different contributions by well-known scholars on capital flows to emerging market economies. The book is a must read both for practitioners as well as academics interested in up to date analyses of the determinants and policy implications of capital flows to emerging markets since the Asian crisis.' - Robert Lensink, Professor in Finance and Financial Markets, Department of Finance, Faculty of Economics, University of Groningen

'The period following the Asian crisis has not only witnessed a big decline in the size of capital flows to emerging markets, but also a great deal of volatility in those flows. Ffrench Davis, Griffith-Jones and collaborators have produced an extremely useful synthesis of developments that have contributed to the decline and volatility in capital flows, with thoughtful analysis and generous statistics to support it. The attempts to redesign the international financial architecture need to pay careful attention to reforms by suggesting changes that both borrowers and lenders need to make. This book is a timely attempt to seek to address this vital issue by suggesting reforms that could be made to make recipient countries less vulnerable to global financial instability.' - Abdur Chowdhury, Chief Economist and Director, Economic Analysis Division, United Nations Economic Commission for Europe, Geneva