Emerging markets and macroeconomic stabilization: With special reference to Asia Pacific economies

Abstract

Abstract Market forces, structural factors, financial liberalization and concerted policy measures coalesced to globalize the financial markets. Initially Asia Pacific economies did not receive much attention from the international capital market but by 1990s the scenario underwent a considerable transformation. Rapid growth, macroeconomic stability and strong fundamentals made the region exceedingly attractive to international investors. Consequently, the region was highly successful in attracting foreign direct investment and securitized capital, which includes both equity and international bond investment. Volatility of securitized capital has always been a cause of worry. It is influenced by both the global factors and country‐economy‐related factors. Capital inflows have a great deal of impact on the demand for credit and money supply in the recipient economy. The Asia Pacific economies were highly successful in sterilizing the capital inflows. Volatility in external financial inflows can be notoriou...