Global Capital Flows and Financial Disturbances in Developing and Emerging Markets
Global Capital Flows and Financial Disturbances in Developing and Emerging Markets

Summary/Abstract: In this paper we analyze the relationship between the free movement of global capital and financial disturbances in developing and emerging markets and recommend strategies aiming at preventing financial crises in the short and the long run. In the short run it is of utmost importance that economic authorities in developing and emerging markets constrain indebtedness and design a correlated capital structure of domestic market participants. In the long run, the superior strategy is to build a strong industrial sector which generates economies of scale, innovations and synergies with other sectors. Control of capital flows could prove as a useful strategy in constraining indebtedness and designing a desirable capital structure of local economic actors.

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