Global Fund Flows and Potentials for Emerging Markets

Table of contents :
W2......Page 1

Citation preview

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi,10(2)

GLOBAL FUND AND POTENTIALS FOR EMERGING MARKETS Metin TOPRAK Eskişehir Osmangazi University Faculty of Economics and Administrative Sciences Rıdvan ÇABUKEL Saving Deposit Insurance Fund Vice President

Abstract

Keywords: Financial Flows, Global Bond Market, Financial Instruments, Emerging Markets, Borrowing.

31

Metin TOPRAK & Rıdvan ÇABUKEL

In this paper, fund flows and their allocation among emerging countries are examined in the perspective of the global economy. The argument that huge amounts of current global fund flows create instability around the world is strictly rejected here. We argue that high liquidity of fund flows eradicate inefficiencies, force economic rationality, and finally create opportunities for rationalized developed and emerging markets. International bond and debt markets, syndication loans markets and equity investments are main means of fund flows in the global context. Asian crisis (1997-98) interrupted and decelerated fund flows to emerging countries until the end of 2002. The global fund flows increase liquidity degree of world output and trade. This high transitivity creates both opportunities and threats for emerging markets. Institutional quality and level of human development are the key issues to cope with these threats and to capture opportunities. Discrepancy in real and financial markets, disproportion between finance geniuses and limited regulation and supervision capacity of public authorities has caused recent financial failures. Regional growth rates, deficits in current accounts, ratio of national saving to investment, and public sector borrowing requirements are taken as the primary motives behind the international fund flows. During the 1990s emerging countries in Asia and Latin America attracted most of the international funds. The cases of Turkey and the Eastern & Central European new EU member markets show that financial stability in a country is one of the main driving factors to attract capital flows.

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi, 10(2)

KÜRESEL SERMAYE AKIMLARI VE GELİŞMEKTE OLAN PİYASALAR İÇİN FIRSATLAR Metin TOPRAK Eskişehir Osmangazi Üniversitesi Rıdvan ÇABUKEL

Tasarruf Mevduatı Sigorta Fonu Başkan Yardımcısı

Metin TOPRAK & Rıdvan ÇABUKEL

Özet Bu çalışmada, fon akımları ve bu akımların gelişmekte olan piyasalara yönelimi küresel ekonomi bağlamında ele alınmıştır. Bugünkü devasa küresel fon akımlarının istikrarsızlık yaratarak krize yol açtığı şeklindeki iddia bu çalışmada reddedilmektedir. Yüksek likiditedeki fon akımları, etkinsizlikleri ortadan kaldırmada, aktörleri ekonomik rasyonaliteye yöneltmede ve nihayet rasyonel çalışan gelişmiş ve gelişmekte olan piyasalar için yeni fırsatlar ortaya çıkarmada oldukça önemli işlevler görmektedir. Uluslararası tahvil ve kredi piyasaları, sendikasyon ve seküritizasyon piyasaları başlıca fon akım araçlarıdır. 1990’larda, Asya’daki gelişmekte olan piyasalar ile Latin Amerika ülkeleri küresel fonların çoğunu çekmiştir. Asya krizi (1997-98), 2002 yılı sonuna kadar süren bir dönem için gelişmekte olan fon akımlarını önemli ölçüde azaltmıştır. Küresel fon akımları dünya üretiminin ve ticaretinin likidite derecesini artırmaktadır. Bu yüksek geçişkenlik, gelişmekte olan piyasalara bir yandan yeni fırsatlar sunarken, diğer yandan çeşitli tehlikeler de ortaya çıkarmaktadır. Kurumsal kalite ve insani gelişmişlik düzeyi, sözkonusu tehlikelerle baş etmede ve olası fırsatları değerlendirmede anahtar konumdadır. Finansal ve reel piyasalar arasındaki kopukluk ile özel sektörün finans dâhileri ile kamu kesiminin düzenleme ve denetim kapasiteleri arasındaki, birincisi lehine olan, orantısızlığın son finansal krize yol açtığı yönünde bir görüş birliği vardır. Bölgesel büyüme oranları, cari işlem açıkları, tasarruf/yatırım oranları, kamu kesimi borçlanma gereği gibi değişkenler uluslararası fon akımlarının ardındaki temel dürtülerdir. Ayrıca, Türkiye ve Doğu ve Merkezi Avrupa örneklerinin de gösterdiği gibi, bir ülkedeki finansal istikrar küresel fonları çekmede etkili olan ana faktörlerden biridir.

Anahtar Kelimeler: Finansal Akımlar, Küresel Bono Piyasası, Finansal Araçlar, Gelişmekte Olan Piyasalar Borçlanma.

32

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi,10(2)

1. Introduction In a national economy, there is a very close interaction between real sector and financial sector, and similar interaction is true for fund flows and goods flows in the world economy. There are theoretical explanations for the reasons of international trade of goods and services including global fund flows. Generally, driving factors for global fund flows are mainly steaming from differences in inflation, output, savings, investments and current accounts at national level.

The current financial crisis and need to reform related international bodies attract more attention on financial architecture and global economic order. In the last two years, turmoil in markets of the developed economies has spread up very quickly across the world. Weak and fragile capital base of mortgage and hedge markets are the main forces behind this phenomenon. It seems that decoupling argument is not valid for the recent USA-lead economic unrest; almost all developed and developing markets feel the fluctuations. Current economic slowdown has been predicted by several institutions. However, the prediction of the exact time and the magnitude of the crisis are almost impossible (Nilsson and Guidetti, 2008). High density of interaction between developed and developing markets bring transmission mechanism of financial crises to the agenda. Although global downturn and current financial crisis led by developed economies, vulnerability and recessionary impacts have rapidly spread to the

33

Metin TOPRAK & Rıdvan ÇABUKEL

After collapsing of the former Soviet Bloc, some newborn opportunities and threats have appeared in the international financial markets. Financial and monetary markets of those emerging economies have subjected to turmoil of competitive markets. Emerging markets can be classified in four broad groups: Latin American emerging markets, Eastern and Central European emerging markets, Far-Eastern emerging markets and others -such as Turkey, Israel, Russia, India, China. There are a few different patterns in terms of emerging markets. Some writers argue that there is a new phenomenon called decoupling. Decoupling means separation of developed and developing markets in the face of economic fluctuations. However, decoupling of different group of emerging markets is also important and deserves to be analyzed. We argue that decoupling is more pervasive among different group of emerging markets than among the groups of developing and developed markets. The main reason for this argument is the benchmark of each group of emerging markets.

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi, 10(2)

Metin TOPRAK & Rıdvan ÇABUKEL

developing markets (McKinnon and Schnabl 2009). The transmission of stress from global factors and advanced economies to developing countries consists of global factors (commodity prices, global output, global interest rates), advanced economies (financial stress) and countryspecific factors (vulnerabilities, economic characteristics, financial linkages, trade linkages) (Danninger at al. 2009). G20 leaders think that the recent financial crisis is a result of insufficient and out-dated regulation and supervision problem (G20 Working Group 1, 2009, G20, Declaration on Strengthening the Financial System). So they also take the IMF reform into consideration (G-20 Working Group 3: Reform of the IMF Final Report 4 March 2009). Obviously, monetary and fiscal policies as two main tools for policy makers have gained their discussion floor again. The findings suggest that recessions accompany with financial crises tend to be severe and recoveries slow. In parallel, recessions synchronized in the global context are generally long and deep. In addition, recoveries from these recessions are weak. Expansionary fiscal policy is more efficient than countercyclical monetary policy both in shortening recessions and boosting recoveries (Terrones at al. 2009). This financial crisis has not only resulted difficulties for working market mechanism but also for laissez faire philosophy. As well known UNCTAD experts are pretty skeptics toward free market philosophy. In a recent report on the current financial crisis, UNCTAD see the main problems with failure of laissez-faire fundamentalism, blind faith in the efficiency of deregulated financial markets, growing role of large-scale financial investors on commodities futures markets, the absence of a cooperative international system to manage exchange rate fluctuations, lack of global cooperation and regulation, and lack of central role for United Nations in guiding this reform process (UNCTAD 2009). It is not surprise that, every international organisation wants to take a role at the reorganization of international financial order. However, dialogue and cooperation are not sufficient to cope with turmoil but coordination should be ensured among bodies. In fact, the attempt of G-20 has intention to ensure global cooperation and coordination on economic and financial issues. In September 1999, the G-7 ministers announced their intention to “broaden the dialogue on key economic and financial policy issues among systemically significant economies and promote cooperation to achieve stable and sustainable world economic growth that benefits all.” (G-20, The Group of Twenty: A History, 2009) This declaration marked the birth of what later became known as the Group of

34

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi,10(2)

Twenty countries (the G-20). It is interesting that fiscal policy has gained floor in the recent financial crisis and monetary policy lost its throne. The current crisis needs for two main sets of policy measures. While the first group concentrates on repairing the financial system, the second group should ensure to increase demand and restore confidence. It is clear that some of these measures would overlap. These two broad measures groups can be classified as monetary policy and fiscal policy. This is the second historical time that the fiscal policy takes its place as a dominant economic policy (Spilimbergo at al. 2009).

In this article, developments in performance of economies related to monetary and real variables are examined. Inflation and GDP are used as variables to be analyzed. In order to obtain the deficits or surpluses of net savings, savings-investments and government budgetary balances are included in the discussion. In the following section, we analyze current account balances, external & domestic debts and foreign exchange reserves of economies in the criteria of regions and development levels. Finally, in the last section international fund flows to emerging markets are analyzed in detail.

2. Imbalances in National Economies in the Perspective of Resource & Expenditure Approach 2.1. Inflation Government’s initiative on national currency is the primary motive on inflation. Decreasing government’s initiative on national currency leads to durable monetary policy framework (Issing, 2006: 6). Monetarism sees the inflation as a monetary phenomenon in the long run. And today European Central Bank always emphasizes this point (Remsperger, 2006: 2). Since early 1990s, inflation rates in industrial countries have been stabilized as 2-3% and volatility of inflation has been very low (Table 2.1). However, there is an inflation pressure recently which is tending to break its relationship with its past trend (IMF, 2006a: 97-134). Inflation rates in developing countries have decreased significantly and are not

35

Metin TOPRAK & Rıdvan ÇABUKEL

International fund flows play a central role at the current financial crisis and economic downturn. So, we examine fund flows in detail and try to extract some clues from this chaotic atmosphere for emerging markets. We think that developing countries can gain a floor at this financial crisis by strengthening their democratic and economic structures toward universal standards.

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi, 10(2)

primary problems of those countries anymore. Since the end of 2003 oil prices and inflation pressures have risen dramatically in the world economy. This is the first time since the stagflation in the 1970s; both inflation and recession are on the agenda of the policy makers.

Metin TOPRAK & Rıdvan ÇABUKEL

However, it is clear that inflation has always been a great economic problem. In the recent years, many countries from the UK and Peru to Korea and Ghana have practiced inflation targeting. “Strict inflation targeting implies monetary policy focused only on price stability. Flexible inflation targeting implies that the central bank is not exclusively concerned about stabilizing inflation around the inflation target but is also concerned with the stability of the real economy, as represented by the output gap, the employment gap, or the unemployment gap.” (quoted by Rybinski (2006) from Svensson L (2005)). The decreases of inflation rates in developing countries, mainly China, have affected and delayed the increase of prices in developed countries. In industrial countries, increase in prices of services is more than that of goods depended on the degree of being tradable internationally. In fact, trade integration in the world economy has positive effects on general price level. Low prices of imported goods have pressures on prices of goods produced in domestic market. Another reason for low inflation and its low volatility is the policy pursued by central banks and governments to reach and sustain low level of inflation. Integration of trade in the world economy and technological developments have given a rise to laborsaving production techniques and thus has weaken the relationship between labor and inflation considerably (BIS, 2006: 74). The correlation between increase of inflation and wages decreased notably between 1991 and 2004, when compared to 1965-1979 period (BIS, (2005 Annual Report), 2006: 74).

2.2. Output The world economy has been changing in the context of both degree of international trade and its composition of agriculture, industry and services. The world economy has become more integrated due to the use of internet and its connection speed, the decrease in costs of logistics and communication and elimination of barriers in tariffs and non-tariffs in international trade. In the 21st century, Asian countries primarily China and India have showed considerable economic performance and become global actors in the world economy.

36

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi,10(2)

Total GDP of the world economy is about USD 62,1 trillion at the end of 2008. Despite the current economic slowdown, expectation for growth of the world GDP is over 2 percent for 2009 and 2010. However, some other international institutions expect 1.7 percent contraction in global growth for 2009. This would be the first decline in world output since World War II. GDP is projected to decline by 3 percent in OECD countries and by 2 percent in other high-income economies. World Bank, “As Global Economy Deteriorates, World Bank Predicts Sharply Slower Growth in Developing World In 2009; Weak Recovery in 2010”. Except extremely pessimist expectations, there is no important handicap for the growth performance of countries and regions and performance of the world economy continue to meet the expectations in the long-term. The world economy has been expanding steadily since 2003. Global growth rate is stabilized about 4.5-5.0 percent and it is expected that this trend will continue at a slower rate not only in advanced economies but also in emerging markets and developing countries as a whole. As a leading economy the performance of the US economy is still positive in the short term (Kato, 2006; Fukui, 2006). Growth of the world economy is healthy enough and international trade and current accounts do not carry any serious negative effect for the United States in short term. Recent banking losses and fluctuations in the US mortgage market have created some worriers about ongoing stability.

37

Metin TOPRAK & Rıdvan ÇABUKEL

Global finance markets have highly integrated in the world economy. In 1952 there were only seven countries (US, Canada and 5 Latin American countries) allowing free-floating exchange rates in current accounts. Today, 164 countries have accepted the rules in Article VIII (Krueger, 2006). Article VIII covers general obligations of members (avoidance of restrictions on current payments; avoidance of discriminatory currency practices; convertibility of foreign-held balances; furnishing of information; consultation between members regarding existing international agreements; obligation to collaborate regarding policies on reserve assets). Transaction in capital accounts is free more than any time in the past. As 45 percent of exported goods were agricultural products in 1950, 37 percent thereof was industrial. However, services have started to have important share in international trade. In 1980, services sector reached at 15 percent and industrial goods at 59 percent of trade. Tourism, other services and capital flows increased its share as well. Income and output level increased all over the world. In the US, per capita income amounted to USD 13,000 in 1950 with constant prices of 2005, to 22,200 in 1975 and to 41,900 in 2005.

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi, 10(2)

Global growth in industrial countries has been supported by fast investment growth and actual growth rate has been exceeding expectations in some emerging economies. Because of high oil prices and its volatility, imbalances in current accounts and bird flu problem; it is foreseen that possible difficulties in financial market conditions would continue for a few years (Table 2.2).

Metin TOPRAK & Rıdvan ÇABUKEL

2.3. Savings and Investments It is possible to analyze global imbalances from two angles: savinginvestment balance and current account balance. Ultimately these are two sides of the same coin (Remsperger, 2006: 3). Across the World, savings rate on average is 22.9 percent between 1990 and 1999, 22.0 percent between 2000 and 2007. There is a continuing and gradual decreasing trend in US saving rates (from 18.0% in 2000, to 12.6% in 2008. However, savings rates in developing countries have increased from 25.4% (in 2000) to 33.5% (in 2008). Investment rates for the world economy have remained stable during the same period (22.5%-23.3%) (Table 2.3). The highest saving rates are around 30-40 percent in industrialized Asian economies primarily in Japan, Middle East and Commonwealth of Independent States. Countries with relatively low savings rates are mostly developed countries primarily the US, Central and Eastern Europe, Africa and Western Hemisphere. Consequently, countries that have higher savings rates than investment rates are oil exporting countries, which are mostly Middle East countries, newly industrialized Asian economies, members of Commonwealth of Independent States and Japan. In addition countries in Euro area have low positive differences between savings rates and investment rates. Since national savings are not enough for investments, countries in the need of external savings are developed countries primarily the United States, Central and East European countries and the Western Hemisphere (BIS, 2006; OECD, 2006). Liquidity in the world economy has changed the dividend policy and investment behavior of corporations in G7 countries. Companies that normally borrow from the public and make their investment have begun to save money. Even the companies with high profit margin and strong cash flows have begun to save money, pay their debts and buy back their own shares (Wessel, 2005). Financial companies have also saved excessively since early 1990s. Undistributed profits of financial companies in G7 countries reached to the highest level of the last 20 years. Non-financial companies have become net lender. During 200138

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi,10(2)

2004 period, cash accounts as ratio of total assets doubled that of 19962000 (IMF, 2006b: 135-159). Indeed, low interest rates caused relatively high profits. Continuous technology development reduces necessary expenses in order to reach a specific size of capital. Companies tend to invest in foreign asset instead of domestic. Another reason for the increase of cash and cash equivalent assets is the uncertainty in the environment.

Increases in private sector credits are associated with a reduction in savings. Aging population increases pressures on savings. Savings has positive relationship with terms of trade. The results suggest that an increase in the terms of trade by 1% would imply an increase of ¼% percent of GDP in the savings rate. Strong output growth leads to high amount of investment. The higher availability of credits leads to higher investment rates. The higher cost of capital leads to lower investment rates.

2.4. General Government Balance Imbalance of public income-expenses is an important issue in developed countries due to social programs. Countries with savings surpluses in savings-investment balance are generally those producing and selling natural and raw materials. Countries with savings shortfalls generally are the developed countries and the countries within a dynamic developing trend. The public income-expenditure balance is in accordance with the Maastricht criteria in Euro area. For the US, general government balance surplus is 1.6% of GDP in 2000, -4,1% in 2008 and expected to reach 4.6% in 2009. Japan has also an important fiscal deficit in public incomeexpenses (-3.4% of GDP in 2008) and that level seems stable (Table 2.4).

39

Metin TOPRAK & Rıdvan ÇABUKEL

IMF staff carried out econometric analysis and dynamic factor models to determine causality of recent savings and investment behavior in global perspective. The result of their analysis is as follows (IMF, 2006b: 98104). Higher rate of output growth increases savings. Fiscal consolidation accompanies with higher savings rates. In industrial countries, the increase by 1% point increase in per capita output growth would lead to an almost 1 percent of GDP increase in the national savings rate. For emerging market economies, the estimated impact is smaller, at 1/2 percent of GDP.

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi, 10(2)

3. External Imbalance: Current Accounts, Debts and Reserves 3.1. Current Account Balance

Metin TOPRAK & Rıdvan ÇABUKEL

In general, developed economies have current account surpluses. However, deficit of the US current account is expected to continue (USD -788 billion in 2006, USD -664 in 2008, and USD -486 in 2009). Although countries in Euro Area have foreign trade surpluses, their current accounts have shortfalls at very low level. As a ratio of GDP, shortfall of current account in the US has been increasing continuously and it is -6.0% in 2006 and -5.3% in 2007 and -4.6% in 2008. This ratio is expected to be -3.3% in 2009 (Table 3.1). Besides specific factors which determine current account balance, there are also common factors among countries. According to IMF research, there are some findings regarding current accounts (Kato, 2006). The increases in savings rates of US affect positively shortfalls of its current account. In Asia, except China, and oil exporting countries, investment increases contribute significantly to solve imbalances of current accounts. GDP increases in Japan and Euro area would lead to a decrease in US current account deficit. Increases in short term interest rates of the US affect very little its current accounts. Its reason is that the interest rate increase in the US is parallel to the increases in other countries. Global current account imbalances of this magnitude would not have been possible without financial globalization. And financial globalization has been experienced with the beginning of the emergence of a global savings pool (Rato, 2006).

3.2. External Debt Total external debt of all countries is USD 54.6 trillion as the end of 2008. The shares of the US and the UK are 22.4% and 19.1% respectively (Table 3.2). Developing countries’ share in the world external debt is about 9%. The remaining external debt belongs to developed markets. The average ratio of external debt to GDP for emerging markets is about 25% as end of 2008. However, this ratio is over 51% for Central and Eastern Europe in 2008 (Table 3.3 and 3.4).

3.3. Domestic Debt Outstanding amount of domestic debt securities across the world is over 60 trillion US Dollars at the end of September 2008 and the total increase rate is 103% in the period of 2000-08. The amount consists of 47.4 percent of governments, 41.8 percent of financial institutions and 10.7

40

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi,10(2)

percent of corporate bonds (Table 3.5). Public sector is the biggest borrower in domestic financial markets in the period of 2000-08. While share of financial institutions and corporations is considerable in countries with developed capital market, this share is very low in countries with less developed capital markets. Crowding out effect differs among countries. In this period, while the highest rate of increase belongs to governments (98%), the lowest rate of increase belongs to corporate sector (57%). While corporations and financial institutions are the main players in domestic bond market in developed countries, government bonds are the only securities traded in most developing markets (Table 3.6).

3.4. Change in Reserves

4. Global Fund flows: The Potential for Emerging Markets 4.1. Interest Rates By the end of 2005, developed countries, primarily the US, began to take measures to slow down their economic growth. The main tool of this policy is to increase interest rates. Increases in interest rates of developed countries will also interrupt the fund flows to developing countries. On the other hand, currency of developed countries will appreciate and their competitiveness in export will be limited and vice-versa for developing countries. However, higher interest rates in developed countries discourage investments and encourage savings; in other words, it will cause lower investment and growth rates. This will reduce the importation capacity of developed countries, which will affect negatively developing countries that export from those markets. Ironically, today, the USA and other developed countries try to cope with stagnation or risk of recession.

41

Metin TOPRAK & Rıdvan ÇABUKEL

Foreign exchange and gold reserves have increased dramatically in recent years. Accumulation in reserves primarily has come from net export demand of final goods in developing Asia, and rising prices of gas and oil in Commonwealth of Independent States and the Middle East (Table 3.7). Outstanding amount of reserves across the world is over 7.7 trillion US Dollars at the end of 2008. 32.5% percent of this amount only belongs to China (including Taiwan and Hong Kong). The second biggest share is Japan’s 12.4%. The rank for Russia’s 5.7% reserves is the third (CIA database, online). Value depreciation of global reserve currencies brings big losses to the countries which have huge foreign exchange reserves. The world economy has experienced this scenario a couple of times (Table 3.8).

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi, 10(2)

Metin TOPRAK & Rıdvan ÇABUKEL

The stability in global financial markets has been volatile and uncertain since the middle of 2008. Both short and long term interest rates continue to decrease thanks to measurements taken by governments (Table 4.1). During 2006, financial markets have been priced with slow increases in short and long term interest rates (Kato, 2006). However, since the beginning of 2007, regressive expectations on output have forced developed countries’ authorities to take some measures to compensate economic stagnancy. Global fund flows use means of international bond and debt markets, syndicated loans markets, and equity investments. Investor decisions on holdings of these assets are mostly affected by interest rates, corporate earnings, exchange prices and other economic factors. In this section, figures produced by BIS are used as it is published in Quarterly Report of BIS since there is no data released for public.

4.2. Capital Flows to Developing Markets Developing countries have attracted more capital flows due to differences in return rates. The fund flows to those markets have occurred despite high oil prices, rising global interest rates and growing global payments imbalances. As end of 2008 the net private capital flows to developing countries reached to USD 330.7 trillion. Developing Asia, Western Hemisphere and Central&East European blocs have attracted biggest direct investments respectively in the 1980-2008 period (Table 4.2 and 4.3). Privatizations, mergers and acquisitions, external debt refinancing, strong investor interest in local-currency bond markets in Asia, Central and Eastern Europe, and Latin America are the main drivers behind this trend. The share of developing Asia, and Central and Eastern Europe in net capital flows to developing markets are the first and the second highest ratios respectively. A striking point in fund flows to developing countries is increasing share of debt in total private capital flows (World Bank, 2006). It is clear that developing countries benefit from improved global market conditions and investment climates. Global financial integration is increasing the funds flows internationally and this leads to decreasing fund price. Financial integration enhances the smooth and effective transmission of monetary policy, and financial integration is, first and foremost, a market-driven process (Trichet, 2006a and 2006b.). Actually, a credible monetary policy, flexibility in all markets and further progress in terms of economic and financial integration should be taken together

42

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi,10(2)

(Trichet, 2006c). An astonishing example is the different patterns of the European financial and real markets. European economies have become more integrated, however the European financial markets have long been very fragmented (Srejber, 2006). Nevertheless, integration of international financial markets is also raising serious problems to governments to sustain financial stability. Easy money is very useful when it inflows, but it is very painful when it outflows. There are important differences between developing countries in access to international credit markets as well as the kind of financial flows.

Private capital flows (loans, bonds and equities, excluding FDIs) to emerging markets decrease sharply after the crises of Asia and Russia in 1997 and 1998 respectively and reached at the lowest level in 2002. In 2003, there are significant increases in capital flows to emerging markets. In instrument perspective, loans, bonds and equities have almost equal weights in capital flows to emerging countries. The highest amount of global funds flow to emerging markets was around USD 250 billion in 1996. In 2007, this figure is just above USD 302 billion. Private capital flows to emerging markets were allocated mostly in Asia and Latin America before the Asian regional crises in 1998. Asian crises caused contagious affect and panic in Latin America. After the recovery of Asian economies, its share started to increase in 2001. Due to expanding process, European countries received high amounts of capital flows. Spreads on emerging market bond loosened or tightened with parallel to capital inflows to emerging countries. Bonds with B rating paid 500 bp spread before 1998 crisis and these spreads increased to around 1800 bp for similar bonds along the crisis (Upper and Wooldridge, 2006: 4). By the end of 2005, spread for B rated bonds decreased to 300 bp. Similar cases are valid for BB and BBB rated bonds however, spreads between bonds applied different ratings varied based on the market conditions (BIS database). Ratings and spreads of emerging market bonds have been changed. During 1999-2005, average ratings were BB and interest rate spreads were 1000 bp. In 2001, there was a sudden rise due to problem in some emerging economies, such as crises of Turkey in 2000-2001. Recently,

43

Metin TOPRAK & Rıdvan ÇABUKEL

Capital flows between developing countries are now growing more rapidly than those between developed and developing countries particularly in foreign direct investment. But in terms of size, the amounts of the flows between developing countries are still small, but they do reflect those countries’ growing size and power.

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi, 10(2)

Metin TOPRAK & Rıdvan ÇABUKEL

there has been a significant improvement in ratings of emerging market bonds and it reached to the level of BB+. Investors’ appetite for risk and improvement in ratings made sovereign spreads tighter. JP Morgan’s EMBI Global Diversified Index closed at 197 bp on 24 February 2006, about 100 bp below the previous record low reached in mid-1997 (Upper and Wooldridge, 2006: 3). Upper and Woolbridge (2006:4) emphasized that credit ratings tend to be lagging indicators of creditworthiness although credit agencies changed their criteria after the Asian financial crises such as by giving greater consideration to liquidity risk and financial system strength. Nevertheless, it is mentioned that investors have underpriced the country risk and that emerging market could be vulnerable to a repricing risk. Turmoil in Turkish money and capital market during May of 2006 could be seen as a part of correction of country risk.

4.3. Issuance of Debt Securities by Emerging Markets One of the most important sources of global fund flows to emerging countries is debt securities issued by emerging market entities. Debt security could be issued by corporate sector, financial institutions or government entities to create a funding; on the other hand they reimburse some of their bonds. In recent years, an interesting development has been occurred. Moody’s suggests that there are currently 250 Islamic mutual funds operating with $300bn of assets and 300 Islamic financial institutions holding more than $250bn of assets around the world. Another $200bn of assets is estimated to be held in the Islamic “windows” – or subsets- of conventional banks, such as Western investment banks (Tett, 2006). Over 90% of international debt securities belong to developed countries. The share of developing markets hardly reaches 10% (Table 4.4). The dominance of developed countries on international debt securities seems to continue in the long-term. As the end of 2008, total amount of this market reached to about USD 24 trillion. In emerging markets the largest debt securities issuers are government and financial institutions on average. Financial institutions in emerging countries are main source of funding for government budget deficit and hold large amount of government securities in their balance sheets. On the other hand, in the developed countries the primary source of financing for economic requirements is financial institutions (Table 4.5 and 4.6).

44

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi,10(2)

4.4. Derivatives

The amounts outstanding of over-the-counter (OTC) derivatives reached to about USD 684 trillions. While 67 percent of this amount belongs to interest rate contracts, 9 percent belongs to foreign exchange contracts and about 8 percent goes to credit default swaps. It is clear that the amount of outstanding can easily destabilize international financial market.

5. Conclusion In the process of EU enlargement, new members and candidate countries have received significant share from international capital flows since 2002. It is expected that fund flows to new members and candidate markets will proceed as those countries continue to pursue reforms for EU membership, as portfolio investment as well as FDI. In case of full membership to EU, the single currency would circulate in candidates and new members and this would contribute to financial stability as well (Papademos, 2006: 4; Bernstein, 2006:1, 4). Amount of international funds to emerging markets largely depend on the geographical and political affiliation of that group. Emerging countries in Central and Eastern Europe are the most beneficiary markets in this context. International funds available to emerging markets reached the lowest level in 2002. Before 2002, emerging countries in Latin America and Asia received significant amount of international funds. However, emerging countries in Latin America has had little share after 2002 and emerging countries in Europe have attracted large amount of international funds thanks to positive developments in EU membership process.

45

Metin TOPRAK & Rıdvan ÇABUKEL

In current crisis, derivatives have attracted more intention than any other financial product. The reason lies at the origin and transmission mechanism of derivatives. There is no doubt that to trace derivatives inside and outside requires high-talented human resources, prudential regulations and mechanisms. The USA and the other developed countries also realized that prudential supervision is a core pillar of a healthy financial system. IMF, World Bank, IOSCO, BIS and other related international organizations have tried to develop standard and codes in terms of accounting, corporate governance, supervision and transparency. Not only private sector benefits from those codes and standards but also public sector institutions realized the importance of them. Derivatives can be used as a useful tool to mitigate losses by hedging mechanism and investors also can use derivatives by speculation.

Metin TOPRAK & Rıdvan ÇABUKEL

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi, 10(2)

International banks have been entering to new markets by margers&acquisitions. For instance, mergers & acquisitions of Spanish banks in Latin America and Greek banks in Balkans are noteworthy. International banks, as best practices will help emerging markets to provide risk management perspective of financial institution. However, as international banks become bigger, their supervisors will face more difficulty of supervision on consolidated basis. International rules such as Basel-II need to be applied all over the world and intensive cooperation among supervisory bodies required. Supervisory bodies especially in emerging countries have to advance their understanding of supervision. Shortfall of Basel-II is under scrutiny in the first quarter of 2008. Turmoil and scandals at international banks accelerated the efforts on Basel-II. Internal systems of institutions and market discipline are the two primary fields need to be developed (Wellink, 2008). Emerging countries in Europe that are mostly accession countries including Turkey perform necessary reforms in various sectors, laws and applications. Support level of membership to EU limits the resistance of opposition parties such as nationalist and anti-liberals and provides confidence for reformists. Such positive supports decrease political risk of the country and speed up the inflows of capital. Decrease of political risk lowers the costs of capital and debt, and increases asset prices. Integration of international financial markets increases fragility of financial systems. There is a need for ultra-national surveillance and supervision of financial fragility. Roles of the IMF and the World Bank have been discussed across the world and suggestions have been focused on changing their roles in this perspective. These institutions develop new policies such as Financial Sector Assessment Program and Financial Stability Indicators. Similarly, committees established under Bank for International Settlement, IOSCO and The Joint Forum have been setting international rules for financial institutions which aim financial stability. Turkey has a unique opportunity in attracting international capitals. Turkey has received significant amount of international funds through investments, privatizations, loans and syndicated credits. In order to obtain funds from oil exporting countries, especially countries nearby Turkey, government agencies as well as associations have to improve their relationships with those countries and gain their confidence in Turkish market and business environment. This can be succeeded primarily by cooperation among supervision authorities in financial sectors.

46

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi,10(2)

Developed economies disperse their financial, production, currency, inflation and labor cost risk by oversea investments. This would make contagion effect more pervasive but more mitigated. If the markets of developed countries well-managed it is not likely to expect supply side or labor class problems across the world. Current account deficit and stable and solid currency are the main handicappers before both developed and developing markets. Only Central and Eastern European markets have a net savings gap. Neither developed nor other developing markets face such a source problem as groups. However, EU membership plays very compensative role for new members and candidates.

References Adams, T. (2006), “Working with the IMF to Strengthen Exchange Rate Surveillance,” AEI Seminar, JS-4002, February 2. http://www.treasury.gov/press/releases/js4002.htm. Bernanke, B.S. (2006), “Hedge Funds and Systemic Risk,” BIS Review, 41. Bernstein, N. (2006), “A View from the Outside- Effects on the Introduction of the Euro,” BIS Review, 40. Bies, S.S. (2006), “Implementing Basel II- Choices and Challenges,” BIS Review, 40. BIS [Bank for International Settlements], (2006), 75th Annual Report. Central Bank of Turkey, Electronic data dissemination system (evds). Danninger, S. , R. Balakrishnan, S. Elekdag, and I. Tytell, “HowLinkages Fuel the Fire: The Transmission of Financial Stress from Advanced to Emerging Economies”, World Economic Outlook (WEO) April 2009. de Rato, R. (2006), “A Rising Tide Lifts All Boats: How Europe, by 47

Metin TOPRAK & Rıdvan ÇABUKEL

The more developing countries make their political and economic structures adapted to developed countries the more they would benefit from international capital flows. However, the competition is not only among profit-seeking developed countries but also among capital-seeking developing countries and this last one is much harsher.

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi, 10(2)

Promoting Growth, Can Help Itself and Help the World,” Speech at The Austrian National Bank Seminar, Vienna, Austria, May 22. Dodge, D. (2006), “The evolving international monetary order and the need for an evolving IMF,” Woodrow School of Public and International Affairs, Princeton, 30 March. Fort, J.L. and P. Hayward (2004), The Supervisory Implications of the Failure of Imar Bank, August.

Metin TOPRAK & Rıdvan ÇABUKEL

Fukui, T. (2006), “The Outlook for Japan’s Economy and the Conduct of Monetary Policy,” BIS Review, 40. G20. (2009), Working Group 1: Enhancing Sound Regulation and Strengthening Transparency, Final Report, 25 March. G20. (2009), Declaration on Strengthening the Financial System London, 2 April. G-20. (2009), The Group of Twenty: A History, 130p. G-20. (2009), Working Group 3: Reform of The IMF Final Report 4 March. Hannoun, H. (2006), “Deputy General Manager of the BIS,” at the 41st Conference of the SEACEN Governors Bandar Seri Begawan, Brunei Darussalam, 4 March. IMF. (2006), World Economic Outlook, April, Statistical Appendix. IMF. (2006a), Turkey: Report on the Observance of Standards and Codes-Fiscal Transparency Module, March, IMF Country Report No.6/126. IMF. (2006b), World Economic Outlook, April. Issing, O. (2006), “The Watchers Conference- Theory and Practice of Monetary Policy,” BIS Review, 38. Kato, T. (2006), “Opening Speech” at the Seventh Asia-Europe Finance Ministers’ Meeting (ASEM FMM), Vienna, Austria, April 9. King, M. (2006), “Reform of the International Monetary Fund,” BIS

48

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi,10(2)

Review, 11. Krueger, A. O. (2006), “The World Economy at the Start of the 21st Century,” at the Annual Gilbert Lecture, Rochester University, New York, April 6. Longworth, D. (2006), “The Crucial Contribution of the Financial System and Monetary Policy to Economic Development,” BIS Review, 39. Mboweni, T. T. (2006), “Recent Developments in the Global and Domestic Financial Markets,” BIS Review, 42.

McGuire, P. and N. Tarashev (2005), “International Banking Market,” BIS Quarterly Review, December. McKinnon, R. and G.Schnabl, (2009), China’s financial conundrum and global imbalances 49p. BIS Working Papers No 277, Monetary and Economic Department, March. Morck, R. K. and L. Steier (2005), “The Global History Of Corporate Governance –An Introduction,” NBER Working Paper 11062, January. Nilsson, R. and E. Guidetti, (2008), OECD, “Predicting the Business Cycle: How good are early estimates of OECD Composite Leading Indicators?” Statistics Brief February, No. 14, 12p. OECD. (2005), Economic Outlook Database, No.78. OECD. (2006), Economic Outlook Database, No.79. Olson, M.W. (2006), “Compliance Risk Management in a Diversified Environment,” BIS Review, 42. Papademos, L. (2006), “On the Road to the Euro-Progress and Prospects of the New Member States,” BIS Review, 38. Pollmark Research (2006), Turkey Agenda Survey, periodical, Ankara.

49

Metin TOPRAK & Rıdvan ÇABUKEL

McCown, T. A., L. C. Plantier and J. Weeks (2006), “Petrodollars and Global Imbalances,” Department of the Treasury Office of International Affairs Occasional Paper No.1, February.

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi, 10(2)

Rajan, R. (2006), “The ebbing of internationalism and the International Monetary Fund”, The 2006 Krasnoff Lecture, Stern School, New York University (New York, 8 March). Reddy, Y. V. (2006), “Reforming India’s Financial Sector- Changing Dimensions and Emerging Issues,” BIS Review, 39. Remsperger, H. (2006), “Central Banks and Forecasting Needs,” BIS Review, 39.

Metin TOPRAK & Rıdvan ÇABUKEL

Remsperger, H. (2006), “Global Imbalances and Policy Implications”, BIS Review, 41. Rybinski, K. (2006), “Inflation Targeting and the Challenges Ahead,” BIS Review, 42. Sevensson, L.E.O. (2005), “Optimal Inflation Targeting: Further Developments of Inflation Targeting,” Princeton University, CEPR, and NBER, October. Spilimbergo, A., S. at al. (2008), “Fiscal Policy for the Crisis”, IMF Staff Position Note, SPN/08/01, 29 December . Srejber, E. (2006), “Are We Ready to Deal with A Cross-Border Banking Crisis in Europe?,” BIS Review, 39. Terrones at al. (2009) , Marco E., Alasdair Scott and Prakash Kannan World Economic Outlook (WEO) April 2009 Crisis and Recovery, Chapter 3, April 2009, Tett, G. (2006), “Islamic Bonds Issuance at $41bn,” Financial Times, May 30. The Economist, (2006a), “Flying in the wrong direction: Turkey's government may be turning away from Europe,” May 4th. The Economist. (2006b), “A Survey of International Banking,” May 24th. Trichet, J.C. (2006a), “Two Successes of the Euro- the Single Monetary Policy and European Financial Integration,” BIS Review, 40. Trichet, J.C. (2006b), “The Process of European Financial Integration,”

50

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi,10(2)

BIS Review, 41. Trichet, J.C. (2006c), “EMU After Seven Years- Successes and Challenges,” BIS Review, 36. UNCTAD. (2009). “The Global Economic Crisis: Systemic Failures and Multilateral Remedies”, Report by the UNCTAD Secretariat Task Force on Systemic Issues and Economic Cooperation, New York and Geneva, 2009). Undersecretary of Turkish Treasury. (2006a), Public Debt Management, (in Turkish), February.

Upper, C. and Philip D. W. (2006), “Overview: Emerging markets soar to historical highs,” BIS Quarterly Review: International Banking and Financial Market Developments, March. Weber, A.A. (2006), “Oil Price Shocks and Monetary Policy in the Euro Area,” BIS Review, 38. Wellink, N. (2008), “A Robust Framework for Risk Management,” The Banker, 4 February. Wessel, D. (2005), Wall Street Journal, July 21. World Bank. (2006), Global Development Finance: The Development Potential of Surging Capital Flows. Potential of Surging Capital Flows. World Bank. (2009), http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK :22121495~pagePK:64257043~piPK:437376~theSitePK:4607,00.html [Accessed: April 1, 2009].

51

Metin TOPRAK & Rıdvan ÇABUKEL

United Nations, (2009), World Economic Situation and Prospects 2009, New York.

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi, 10(2)

Metin TOPRAK & Rıdvan ÇABUKEL

Table 2.1. Inflation (%, Average Annual Consumer Prices)

Source: IMF database

52

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi,10(2)

Table 2.2. Gross Domestic Product, Constant Prices (Annual Percent Change)

Metin TOPRAK & Rıdvan ÇABUKEL

Source: IMF database

53

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi, 10(2)

Metin TOPRAK & Rıdvan ÇABUKEL

Table 2.3. Savings and Investment (Percent of GDP)

I: Investment S: Gross national savings,

Source: IMF database.

54

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi,10(2)

Table 2.4. General Government Balance (Percent of GDP)

Source: IMF database.

Source: IMF database.

55

Metin TOPRAK & Rıdvan ÇABUKEL

Table 3.1. Current Account Balance (Billions of US Dollars, Percent of GDP)

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi, 10(2)

Metin TOPRAK & Rıdvan ÇABUKEL

Table 3.2. External Debt (Percent of GDP)

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2079rank.html

56

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi,10(2)

Table 3.3. External Debt (Billions of US Dollars, Averages)

Table 3.4. External Debt (Percent of GDP)

Source: IMF database.

Table 3.5. Domestic Debt Securities by Sectors (Billions of US Dollars)

Source: BIS database

57

Metin TOPRAK & Rıdvan ÇABUKEL

Source: IMF database.

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi, 10(2)

Table 3.6. Domestic Debt Securities by Sectors (Billions of US Dollars) Sep.2008

%

USA

%

JAPAN

%

GERMANY

%

All Issuers

59.722,9

100,0

25.800,3

100,0

9.606,2

100,0

2.660,0

100,0

Governments

28.324,5

47,4

7.322,8

28,4

7.890,4

82,1

1.377,5

51,8

Financial Institutions

24.991,7

41,8

15.512,4

60,1

1.037,2

10,8

1.037,5

39,0

6.406,8

10,7

2.965,0

11,5

678,6

7,1

245,0

9,2

Corporate Issuers

Metin TOPRAK & Rıdvan ÇABUKEL

Source: BIS database

58

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi,10(2)

Table 3.7. Change in Reserves- Periodically cumulative (Billions of US Dollars)

Metin TOPRAK & Rıdvan ÇABUKEL

Change in reserves (U.S. dollars), A minus sign indicates an increase. Source: IMF database.

59

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi, 10(2)

3.8. Reserves of foreign exchange and gold (Billions of US Dollars)

Metin TOPRAK & Rıdvan ÇABUKEL

Rank

Country

US.Dollars, Billions

Share (%)

Cumulative (%)

Date of Information

1 China

2.033,00

26,47

26,47 31 December 2008 est.

2 Japan

954,10

12,42

38,89 31 December 2007 est.

3 Russia

435,40

5,67

44,56

12 December 2008

4 Taiwan

296,40

3,86

48,41

31 December 2008

5 India

250,00

3,25

51,67 31 December 2008 est.

6 France

204,40

2,66

54,33

2008

7 Korea, South

201,20

2,62

56,95

31 December 2008

8 Brazil

197,40

2,57

59,52 31 December 2008 est.

9 Singapore

168,80

2,20

61,72 31 December 2008 est.

10 Hong Kong

165,90

2,16

63,88

11 Algeria

150,50

1,96

65,84 31 December 2008 est.

12 Germany

136,20

1,77

67,61 31 December 2007 est.

13 Thailand

106,30

1,38

68,99 31 December 2008 est.

14 Malaysia

104,40

1,36

70,35 31 December 2008 est.

15 Italy

104,00

1,35

71,71 31 December 2008 est.

16 Libya

99,45

1,29

73,00 31 December 2008 est.

17 Iran

96,56

1,26

74,26 31 December 2008 est.

18 Mexico

91,99

1,20

75,45 31 December 2008 est.

19 Poland

84,48

1,10

76,55 31 December 2008 est.

20 Turkey

82,82

1,08

77,63 31 December 2008 est.

1.718,13

22,4

100,0

The remaining 135 countries

Countries for which no information is available are not included in this list. This page was last updated on 9 April, 2009. https://www.cia.gov/library/publications/the-world-factbook/rankorder/2188rank.html [Accessed: April 1, 2009].

60

31 December 2008

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi,10(2)

Table 4.1. Long-term Interest Rates (%)

2000

2001

2002

2004

2006

2007

2008

Advanced economies

4.5

5.1

4.4

4.2

3.7

4.1

4.2

4.0

United States

5.3

6.0

5.0

4.6

4.3

4.8

4.6

3.7

Euro area

4.7

5.5

5.0

4.9

3.8

3.9

4.3

4.4

Japan

1.3

1.7

1.3

1.3

1.5

1.7

1.7

1.5

United Kingdom

5.1

5.0

5.0

4.8

4.8

4.5

5.0

4.6

Canada

5.3

5.9

5.5

5.3

4.6

4.2

4.3

3.6

Source: IMF database and OECD database.

Table 4.2. Net Private Capital Flows (Periodically Cumulative, Billions of US Dollars)

Net private capital flows comprise net direct investment, net portfolio flows, and other long- and short-term net investment flows including official and private borrowing. In the standard balance of payments presentation, total net capital flows are equal to the balance on financial account minus the change in reserve assets. Because of data limitations, other private capital flows, net may include some official flows. Source: IMF database.

61

Metin TOPRAK & Rıdvan ÇABUKEL

1998

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi, 10(2)

Table 4.3. Net Private direct investment (Periodically Cumulative, Billions of US Dollars) 1980-1989 Emerging and developing economies

2000-2006

2007

2008

2009

1980-2008 %

117,5

924,1

1.379,6

309,9

306,9

322,4

3.038,0

100,0

11,6

36,9

124,8

32,0

38,3

37,1

243,7

8,0

2,0

94,6

241,1

73,2

74,7

75,7

485,5

16,0

Commonwealth of Independent States and Mongolia

-3,2

27,8

65,7

16,7

29,5

35,4

136,5

4,5

Developing Asia

46,2

406,7

503,1

90,5

93,4

94,3

1.139,8

37,5

Middle East

-0,3

42,6

88,6

20,4

13,2

19,7

164,4

5,4

Western Hemisphere

61,3

315,5

356,4

77,0

57,8

60,2

868,0

28,6

Africa Central and eastern Europe

Metin TOPRAK & Rıdvan ÇABUKEL

1990-1999

Source: IMF Database.

Table 4.4. International Debt Securities (% Distribution) Trillion USD All countries

1990

1995

2000

2001

2002

2003

2004

2005

2006

2007

2008

1,6

2,8

6,5

7,6

9,3

11,7

13,9

14,6

18,4

22,7

23,9

100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0 100,0

Developed Countries

81,9

77,5

83,9

85,9

87,2

88,5

89,3

89,3

90,3

90,9

91,3

Developing Countries

6,1

11,4

9,1

7,7

6,8

6,0

5,7

5,7

5,4

5,2

5,0

11,5

10,6

5,9

5,0

4,7

4,3

4,0

3,7

3,2

2,9

2,8

Offshore Centers

0,4

0,6

1,2

1,4

1,2

1,1

1,1

1,2

1,1

1,0

1,0

United States

10,8

9,2

26,6

30,4

29,2

26,2

24,2

24,4

24,0

24,6

25,3

Germany

4,1

8,4

13,1

13,3

14,9

15,8

16,0

14,8

14,0

13,1

12,1

United Kingdom

8,4

7,1

8,4

8,1

8,4

9,3

9,9

10,5

11,2

11,0

11,6

Latin America & Caribbean

3,7

7,0

4,9

4,2

3,5

2,9

2,5

2,3

1,9

1,7

1,5

Asia & Pacific

1,4

2,5

2,2

1,8

1,7

1,5

1,5

1,7

1,6

1,5

1,5

Europe

0,7

1,5

1,5

1,3

1,2

1,2

1,2

1,3

1,3

1,4

1,4

Africa & Middle East

0,3

0,3

0,4

0,4

0,4

0,4

0,4

0,5

0,6

0,7

0,7

International Organizations

Source: BIS database.

62

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi,10(2)

Table 4.5. Crowding Out Effect in International Borrowing Market (Billions of US Dollars) 2008

Financial Institutions

Corporate Sector

Governments

Total

All Countries

18.881,6

2.444,5

1.882,6

23.208,7

Developed Countries

18.195,3

2.206,9

1.379,2

21.781,4

Developing Countries

518,5

204,9

468,7

1.192,1

Offshore Centers

167,8

32,7

34,6

235,1

Source: BIS database.

2008

Financial Institutions

Corporate Sector

Governments

Total

All Countries

81.4

10.5

8.1

100.0

Developed Countries

83.5

10.1

6.3

100.0

Developing Countries

43.5

17.2

39.3

100.0

Offshore Centers

71.4

13.9

14.7

100.0

Source: Calculated from BIS Database .

Table 4.7. Amounts Outstanding Of Over-The-Counter (OTC) Derivatives (%, Trillions of US Dollars)

63

Metin TOPRAK & Rıdvan ÇABUKEL

Table 4.6. Crowding Out Effect in International Borrowing Market (%)

Metin TOPRAK & Rıdvan ÇABUKEL

Eskişehir Osmangazi Üniversitesi Sosyal Bilimler Dergisi, 10(2)

64