Abhatoo - Centre Nationale de Documentation

The liberalization of international financial markets have led to huge international capital flows in search of higher returns in emerging markets during this decade. This has been very beneficial to industrial and emerging market economies, but it has also been a source of great instability when they were quickly withdrawn in large volumes at the first sign of trouble in the nation. A number of reforms have been proposed (and some have already been adopted) by the International Monetary Fund and other international institutions that could go a long way toward reducing the problem. What is important is to discourage excessive liquid or speculative capital flows to emerging markets without discouraging long-term capital flows. In the final analysis, it must be realized, however, that even if all the reforms being considered were to be adopted, they would not eliminate all future financial crises. Some international financial instability and crises may be the inevitable result of liberalized financial markets and the cost that we have to pay in return for the benefits that liberalized financial markets provide to industrial and emerging market economies alike.