Dating the integration of world capital markets
In the mid- to late 1970s, large capital flows resulted from the recycling of the oil export surpluses of the Organization of Petroleum Exporting Countries, many of them through international banks to sovereign borrowers in the developing countries.
There has also been a shift from loans to securities and a rise in the use of foreign financial centers. transactions involve many other developed and developing countries, and the statistical problems of the U. The panel believes this report will contribute to a better understanding of the global financial flows that have come to characterize the rapidly evolving global economy. It con-suited experts in the accounting profession and other expert groups currently examining the changes in global financial markets and the treatment of complex financial transactions.There are other measures of increased integration of financial markets: over the same 1978-1991 period, the value of U. assets abroad rose more than three-fold while the value of foreign assets in the United States showed an even more dramatic six-fold increase. In an environment of deregulated and liberalized financial markets, international capital movements have been driven mainly by economic fundamentals.The macroeconomic conditions of various countries and their trade and tax policies, for example, affect the expected rates of return on various investments in different markets.Meanwhile, the rules and the philosophy with respect to capital transactions were far different: many countries restricted outward capital transfers either because they preferred their capital to be invested within their domestic economies or because they wished to prevent downward pressure on their exchange rates.
The interaction of several powerful forces has produced massive capital flows across national boundaries.
In addition, there has been a surge in the use of new financial instruments and, in particular, of derivative products (such as financial options, futures, and swaps on interest rates, foreign currencies, stocks, bonds, and commodities). In conducting this study, the panel extensively reviewed existing literature, including recent studies by the International Monetary Fund (1987, 1992b), the Federal Reserve Board (Stekler, 1991; Stekler and Truman, 1992), and the Bank for International Settlements (1986, 1992a, 1992b). The panel heard expert testimony and reviewed written comments from numerous government, academic, and industry users on the adequacy of the existing data.