The Boom of Portfolio Flows to ‘Emerging Markets’ and its Regulatory Implications
In the advent of various developments in international financial markets, foreign portfolio investments have assumed an emerging role as a channel for international capital flows to a number of developing countries. While these countries experienced several challenges between 1979 to 1982 because of the recession, oil price increase, and the shift in US macroeconomic policy, the period between 1983 and 1989 entailed a decline in the net international capital flows received by developing countries because of the high levels of negative net transfers of resources from various countries in Latin America to banks. Since foreign direct investments were the only option of channeling in net capital flows for countries in the Western Hemisphere, such also became the case for developing countries in Asia. This chapter examines the implications of utilizing foreign portfolio investments in facilitating international capital flows specifically to developing countries.
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