Mapping Global Markets

Extracted 03AUG from

The 2008 financial crisis and worldwide recession halted a three-decade expansion of global capital and banking markets. Today, growth has resumed, fueled by expansion in developing economies but also a $4.4 trillion increase in sovereign debt. The total value of the world’s financial stock, comprising equity market capitalization and outstanding bonds and loans, has increased from $175 trillion in 2008 to $212 trillion at the end of 2010, surpassing the previous 2007 peak. Similarly, cross-border capital flows grew to $4.4 trillion in 2010 after declining for the two previous years.

  • Cross-border capital flows grew in 2010 for the first time since 2007, reaching $4.4 trillion, but remain 60 percent below their 2007 peak. This reflects a dramatic reduction in inter-bank lending as well as less foreign direct investment and fewer purchases of debt securities by foreign investors. Contrary to conventional wisdom, this report finds that capital flows to developed countries—not those to emerging markets—are the most volatile.

  • Cross-border investment is growing fastest outside the traditional centers of financial wealth. In 1999, the web of cross-border investments centered on the United States, which was partner to 50 percent of all outstanding international financial positions. By 2009, the US share of total cross-border invests had shrunk to 32 percent. This reflected both a surge in cross-border investments within Western Europe following the creation of the euro, and phenomenal growth in the size and complexity of linkages with emerging markets. Prior to the 2008 financial crisis, cross-border investments between Latin America, emerging Asia, and the Middle East were growing at 39 percent annually—roughly twice as fast as these regions’ investments with developed countries.
  • See also