Sovereign Wealth Funds and Emerging Economies: Tools for Boosting Development and Shifting Capital Flows

10 Pages Posted: 14 Feb 2012  

Luis H. Zamarioli

University Sao Paulo

Date Written: February 14, 2012

Abstract

Following the 2008 global financial crisis, Sovereign Wealth Funds (SWFs) gained visibility. Despite the regulation demands by host states, this new sovereign role in international markets can work as an important tool for developing countries. By cushioning imbalance periods and insulating from international fluctuations, SWFs can act to stabilize national economy. SWFs can also strengthen the international financial system, by diversifying the markets’ motivations, but specially by providing long-term investments and greater liquidity. Finally, by moving state international reserves into riskier investments, SWFs can work as a tool for inverting the Lucas paradox and attracting capital influx into developing countries through capital markets.

Keywords: Sovereign Wealth Funds, emerging economies, Lucas paradox, capital flows, financial stabilization

JEL Classification: F21, F52, G15, G18, H30

Suggested Citation

Zamarioli, Luis H., Sovereign Wealth Funds and Emerging Economies: Tools for Boosting Development and Shifting Capital Flows (February 14, 2012). Available at SSRN: https://ssrn.com/abstract=2005116 or http://dx.doi.org/10.2139/ssrn.2005116

Luis H. Zamarioli (Contact Author)

University Sao Paulo ( email )

Largo São Francisco, 95 Prédio Anexo
São Paulo, São Paulo 01005-010
Brazil

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