Financial Stability in Emerging Markets – Dealing with Global Liquidity

Bonn: DIE, 2012

79 Pages Posted: 19 Apr 2012

See all articles by Ulrich Volz

Ulrich Volz

University of London - School of Oriental and African Studies (SOAS) - Economics; Deutsches Institut für Entwicklungspolitik (DIE) - German Development Institute (DIE)

Date Written: April 17, 2012

Abstract

The rapid increase in global liquidity and the large-scale net capital flows to emerging countries have raised serious concerns about adverse effects on the recipient countries; these include the danger of overheating, exchange rate appreciation pressures, inflationary pressure on consumer and asset prices, and risks to financial stability. The historical experience of many emerging countries highlights the risk of a rapid reversal of capital flows, followed by a possible financial and currency crisis. There have also been concerns about the inflationary consequences of excessive global liquidity for commodity prices, including those of agricultural commodities. Against this backdrop, this volume comprises contributions by internationally renowned experts from academia and international organisations who discuss the spillover effects of expansionary monetary policies in advanced countries on emerging economies, and the risks that excessive global liquidity and abundant capital flows to emerging economies entail for macroeconomic and financial stability in these countries. They also discuss policy options for reining in these risks, ranging from capital account management and prudential policies in source and recipient countries to an enhanced monitoring of global capital flows.

Keywords: Global liquidity, international capital flows, capital account management, capital controls, macroprudential policy, financial market stability, emerging market economies

JEL Classification: F3, F4, G1

Suggested Citation

Volz, Ulrich, Financial Stability in Emerging Markets – Dealing with Global Liquidity (April 17, 2012). Bonn: DIE, 2012. Available at SSRN: https://ssrn.com/abstract=2041867

Ulrich Volz (Contact Author)

University of London - School of Oriental and African Studies (SOAS) - Economics

London, WC1E 7HU
United Kingdom

Deutsches Institut für Entwicklungspolitik (DIE) - German Development Institute (DIE) ( email )

Tulpenfeld 4
Bonn, 53113
Germany

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