Financial Globalization and the Integrating Emerging-Market Economies

Abstract

The objective of this chapter is to analyze the role, participation and contribution of the emerging-market economies (EMEs) in the financially integrating world economy. The particular focus of this chapter is the contour of deepening financial globalization of EMEs en masse. For starters, it provides an explanation regarding what EMEs are and the challenges of preparing a universally agreed-upon country classification (Section 2). Comprehensive details regarding the qualitative and quantitative evolution of global private capital flows to EMEs have been analyzed. To render precision to the analysis, this discussion has been divided into cohesive chronological sub-periods. The temporal evolution of financial flows from the global private capital markets has been profiled in this section. It exemplifies that global integration of EMEs took place in the manner of a crescendo, reaching its qualitative climax in the post-2002 period. Quantitatively, 2007 was the high noon of financial globalization in EMEs. As analyzed in-depth in Chapter 3, the sub-prime mortgage crisis erupted in the fall of 2007, mutated into a global financial crisis, spilled into the real economy and thus put paid to the financial globalization of EMEs. The on-going financial globalization reversed abruptly in the EMEs. The transmission mechanism of financial stress from advanced industrial economies into EMEs has also been previously discussed at length.