The decade after the Great Financial Crisis of 2007–09 brought significant changes in the volume and composition of capital flows in the global economy. Portfolio investments and other non-bank financial intermediaries are responsible for an increasing share of foreign capital flows, while banking flows have shrunk in relative terms. This paper considers the implications of such a metamorphosis of finance for capital flows to emerging market economies (EMEs). After examining capital flows from the global financial crisis to the 2020-21 pandemic crisis, we analyze the extent to which a normalization of monetary policies in advanced economies may lead to shocks in those flows, as well as why exchange rate fluctuations between the U.S. dollar and other major currencies can affect capital flows to EMEs. Finally, we assess the range of policy instruments that EME policymakers tend to resort to manage risks derived from capital-flow volatility.

The last year has seen some good news for Latin American economies. The region’s recovery has been stronger than expected, and growth forecasts by the World Bank and IMF have improved since six months ago. Vaccination campaigns and fiscal support have sparked an economic rebound since the second half of last year, despite an apparent loss of momentum in the third quarter of this year. But the future looks uncertain. Latin America is caught between two major global forces that threaten the region’s growth: a potential drop in capital flows from the U.S. as pandemic stimulus tapers off; and decreasing growth in China, where an energy crunch is hitting just as the country’s exhausted property markets begin to go into reverse. To weather the storm, countries in the region will have to target their fiscal support and signal that medium-term frameworks will be followed, while doing what it takes to ensure a private-sector recovery can compensate for policy contraction.

Most countries are now forecast to have lower GDP in 2024 than projected in January 2020 before the pandemic

The transition to zero emissions will involve three simultaneous economic processes

A new allocation of US$650 billion in Special Drawing Rights (SDRs) by the International Monetary Fund (IMF) to its member countries has entered into force last Monday