This paper discusses systematic issues in international finance explained in the International Capital Markets report. The paper describes that the nature and extent of recent banking problems in several industrial countries along with the policy responses to those problems. It is observed that balance sheet problems in banking are widespread among the major industrial countries. The paper also analyses recent activity in the European currency unit bond and exchange markets, and reviews developments in the private financing of developing countries and discusses several issues raised by the recent experience, including the broadening of the investor base for developing country securities, the special role played by regional financial centers in East and Southeast Asia, and the systemic implications of the evolving pattern of developing country financing. A key influence on international capital movements in recent years was the rising international diversification of investment portfolios, which is generally believed to have increased in response to the liberalization of exchange and capital controls in many industrial countries in the 1970s and 1980s.
This paper examines the flow of foreign capital into Arab countries, the nature and pattern of these flows in the last two decades, and the role played by financial institutions in promoting capital flows. The main aim of the discussion is to highlight the significance of foreign investment in the economic development of the Arab region and the crucial role that can be played by well-developed financial markets in mobilizing long-term foreign capital for economic growth. Two major sources of long-term capital are emphasized in the analysis: foreign direct investment (FDI) and portfolio investment. These two sources of private capital are rapidly replacing the more traditional sources of financing to developing countries, such as official grants and loans as well as commercial bank borrowing.
The ongoing process of deregulation and global financial integration is bringing about great changes in the international capital markets and unleashing a breathtaking expansion of cross-border portfolio investment flows. Many of the old controls that prevailed in the major capital markets are now gone. Analysts claim that we are only “two-thirds of the way” toward full deregulation and that many obstacles still prevail. Nevertheless, the segmented, heavily controlled, and often manipulated domestic capital markets in the major world economies have been replaced by an increasingly integrated global market. The Euromarkets, which began as an “add-on” to the domestic markets, have quickly grown to become one of the leading sources of all kinds of financing—from debt to equity—for governments and corporations of industrialized and developing countries alike.
This Selected Issues paper assesses the long-term fiscal position of Canada. Simulations based on current tax and spending policies suggest that the fiscal position will remain favorable until well into the middle of the century, and relatively modest adjustments would be required to make these policies sustainable in the long term. The analysis also illustrates that these conclusions could be easily overturned if pressures to spend the planning surpluses that are expected to emerge in coming years are not resisted, and if measures are not put in place to contain the cost of health care.
International Monetary Fund. Monetary and Capital Markets Department
The bursting of the equity bubble, geopolitical developments, and corporate governance scandals have severely tested the global financial system in recent years. In the fall of last year, these developments contributed to high levels of risk aversion, increased market volatility, widening credit spreads, and limited access to external financing for many emerging market countries. Even in the face of these strong headwinds, however, financial markets have remained remarkably resilient. Indeed, markets strengthened in the first half of 2003, notwithstanding continued lackluster economic growth.