Keywords
Frontier Markets; Portfolio flows; Financial Integration; Balance of Payments Needs
Abstract
This paper investigates to what extent low-income developing countries (LIDCs) characterized as frontier markets (FMs) have begun to be subject to capital flows dynamics typically associated with emerging markets (EMs). Using a sample of developing countries covering the period 2000–14, we show that: (i) average annual portfolio flows to FMs as a share of gross domestic product (GDP) outstripped those to EMs by about 0.6 percentage points of GDP; (ii) during years of heightened stress in global financial markets, portfolio flows to FMs dried up like those to EMs; and that (iii) FMs have become more integrated into international financial markets. Our findings confirm that, in terms of portfolio flows, FMs have become more similar to EMs than to the rest of LIDCs and are therefore more vulnerable to swings in global financial markets conditions. Accordingly, it is important to have in place frameworks to strengthen FMs’ resilience to adverse capital flows shocks.
Recommended Citation
Abidi, N., Hacibedel, B., & Nkusu, M. (2024). Frontier and Emerging Markets: A Perspective from Portfolio Flows and Financial Integration. Journal of Banking and Financial Economics, 2019(11), 19-45. https://doi.org/10.7172/2353-6845.jbfe.2019.1.2
First Page
19
Last Page
45
Page Count
27
Received Date
20 February 2018
Revised Date
3 January 2019
Accept Date
4 January 2019
Online Available Date
5 February 2019
DOI
10.7172/2353-6845.jbfe.2019.1.2
JEL Code
E44; F3; G0; O57
Publisher
University of Warsaw