Global capital flows overview UNCTAD short courses for

Global capital flows: overview UNCTAD short courses for delegates, September 2013, Palais des Nations. By Diana Barrowclough, Senior Economist Division on Globalization and Development Strategies, UNCTAD. 1

Trends (1) Highly volatile global capital flows Source: UNCTAD Trade and Development Report 2013, Ch 1

Trends (2) Volatile net private capital inflows to EMs Source: UNCTAD Trade and Development Report 2013, Ch 3

Why (1)? Correlated price trends in global asset markets Source: UNCTAD Trade and Development Report 2013, Ch 1

Why (2)? Asset composition of the ECB and the US Fed. Reserve Source: UNCTAD Trade and Development Report 2013, Ch 3

Why (3)? Monetary policies in developed countries did not lead to more domestic credit, but contributed to international financial instability MONETARY BASE AND BANK CLAIMS ON THE PRIVAT SECTOR, 2001– 2012 (Per cent of GDP) Source: UNCTAD Trade and Development Report 2013, Ch 3

Why (4)? Net lending/borrowing US & Eurozone Source: UNCTAD Trade and Development Report 2013, Ch 3

Some implications for development (1) - Capital flows management in context _______________________________________ Financing the real economy for meeting the new patterns of demand – hampered or hindered by global capital flows? Investment and access to financing are needed, to fund expansion of productive capacities and their adaptation to new demand patterns. Key challenges: Ø Capital flows management: pragmatic exchange-rate management and capital-account management needed to reduce vulnerability to external financial shocks Ø Domestic financial systems need to channel credit towards productive investment in the real sector.

Implications (2) Sources of investment finance (%) # countries (firms) Internal finance Bank finance Trade credit Equity or stock sales Developed Europe 5, (3354) 68 21 3 5 Emerging Europe 10, (3196) 58 25 5 7 Africa 44, (17, 971) 58 9 3 2 LAC 31, (14, 657) 81 21 10 4 Developing Asia 24, (20, 477) 59 20 3 3 Developing Oceania 5, (619) 67 26 3 9 Transition economies 17, (10, 507) 53 16 4 7

References and further information • Trade and Development Report 2013. • UNCTAD conference: Capital Account regulations and Gobal Economic Governance, October 3 -4, 2013 • WTO Working session: Capital Account Regulations and the Trading System, October 3, 2013 • UNCTAD Development Account project.