Ju Kim, EungStocker, Marc2015-02-262015-02-262014-06https://hdl.handle.net/10986/21525External financing conditions for developing countries have been remarkably favorable in recent months, reflecting expectations of a more drawn-out period of monetary policy accommodation in high-income countries and some narrowing of external vulnerabilities. Additional easing by the European Central Bank, combined with prospects of modest growth and stable inflation in the United States ( Goldilocks recovery ), helped pull down bond yields and volatility worldwide. These benign conditions currently provide support to capital inflows and activity across developing countries, but could at the same time increase the risk of greater and potentially more abrupt market adjustments ahead. Despite some reduction of current account deficits in several developing countries, many remain vulnerable to sudden shifts in investors sentiment and capital outflows. Following a brief period of market turmoil at the start of the year, global financing conditions have eased consider-ably from March to June. Bond spreads for developing countries (i.e. yield difference with 10-year U.S. Treasury bonds) have narrowed, bringing down average borrowing costs to their lowest level since the spring of 2013. Stock markets have also recovered rapidly from a significant sell-off in January/February, despite rising geopolitical tensions and evidence of disappointing activity in the first quarter of the year. As presented in the June 2014 edition of Global Economic Prospects, a more favorable global environment is reflected in upward revisions to capital inflow forecasts for developing countries, now projected to remain broad-ly stable as a percentage of GDP in 2014 and 2015, at around 5.6 percent, before declining again in 2016, to 5.1 percent. While baseline forecasts assume an orderly in-crease in long-term interest rates in high-income countries, the risk of more abrupt adjustments from current low levels has recently increased. Escalating geopolitical tensions or financial stress in some developing countries could also potentially trigger a sudden re-pricing of risk. Despite the recent narrowing of current account deficits in some developing countries, many remain vulnerable to a sharp increase in borrowing costs and/or significant currency depreciations, which could put additional strain on corporate and bank balance sheets.en-USCC BY 3.0 IGOACCOUNTINGALLOCATION OF CAPITALASSET CLASSESBAILOUTBALANCE OF PAYMENTSBALANCE SHEETBANK BALANCE SHEETSBANK LENDINGBANK POLICYBANKING SECTORBASIS POINTBASIS POINTSBENCHMARK BONDBOND FINANCINGBOND FLOWSBOND ISSUANCEBOND MARKETBOND SPREADSBORROWERBORROWING COSTSCAPITAL FLOWCAPITAL FLOWSCAPITAL INFLOWCAPITAL INFLOWSCAPITAL MARKETCAPITAL MARKET REFORMSCAPITAL OUTFLOWSCAPITAL RATIOSCASH FLOWSCDSCENTRAL BANKCENTRAL BANKSCOMMERCIAL BANKSCONSUMER BASECORPORATE BONDCORPORATE BOND ISSUANCESCORPORATE BORROWERSCORPORATE DEBTCOUNTRY EQUITYCREDIT CONSTRAINTSCREDIT DEFAULTCREDIT DEFAULT SWAPCREDIT GROWTHCREDIT RATINGCREDIT RATINGSCREDIT RISKSCREDITORCREDITWORTHINESSCURRENCYCURRENCY DEPRECIATIONCURRENCY DEPRECIATIONSCURRENCY DEVALUATIONCURRENCY MARKETSCURRENCY MISMATCHESCURRENT ACCOUNT BALANCECURRENT ACCOUNT DEFICITCURRENT ACCOUNT DEFICITSCURVE YIELDDEBT FLOWSDEBT INSTRUMENTSDEBT LEVELSDEBT OBLIGATIONSDEFICIT FINANCINGDEFICITSDEPOSITDEPOSIT RATESDEPOSITSDERIVATIVESDEVELOPING COUNTRIESDEVELOPING COUNTRYDISBURSEMENTDOMESTIC CREDITEMERGING MARKETEMERGING MARKET ASSETSEMERGING MARKET BONDSEQUITIESEQUITY FUNDSEQUITY INVESTMENTEQUITY ISSUANCEEQUITY MARKETSEXCHANGE RATEEXCHANGE RATESEXPORT COMPETITIVENESSEXPOSUREEXTERNAL DEBTEXTERNAL FINANCINGFAVORABLE FINANCINGFEDERAL RESERVEFEDERAL RESERVE BANKFINANCIAL CRISISFINANCIAL DERIVATIVESFINANCIAL EXPOSURESFINANCIAL MARKETFINANCIAL MARKETSFINANCIAL SECTORFINANCIAL STABILITYFINANCIAL STRESSFISCAL CONSOLIDATIONFIXED INCOMEFIXED INTERESTFIXED INTEREST RATESFIXED RATEFOREIGN BANKFOREIGN CAPITALFOREIGN CURRENCYFOREIGN DEBTFOREIGN DIRECT INVESTMENTFOREIGN EXCHANGEFOREIGN EXCHANGE MARKETSFOREIGN INVESTMENTFOREIGN INVESTORSFOREIGN OWNERSHIPGLOBAL BONDGLOBAL ECONOMIC PROSPECTSGLOBAL EQUITYGLOBAL RISKGLOBAL TRADEGOVERNMENT BONDGOVERNMENT BOND MARKETSGOVERNMENT BOND YIELDSGOVERNMENT BONDSGOVERNMENT DEFICITSGOVERNMENT GUARANTEESGOVERNMENT SECURITIESGOVERNMENT SECURITIES MARKETSHOLDINGSINCENTIVE STRUCTUREINDEBTEDNESSINFLATIONINFLATION EXPECTATIONSINFLATION RATEINFLATION STARTSINITIAL PUBLIC OFFERINGINSTITUTIONAL INVESTORSINTEREST RATEINTEREST RATE SHOCKSINTERNATIONAL BONDINTERNATIONAL BOND MARKETSINTERNATIONAL CAPITALINTERNATIONAL CAPITAL MARKETSINTERNATIONAL INVESTMENTINTERNATIONAL MARKETSINTERNATIONAL RESERVESINVESTMENT ASSETSINVESTMENT GRADE BORROWERSINVESTMENT PATTERNSINVESTMENT PORTFOLIOIPOLABOR MARKETLIABILITYLIQUIDITYLOCAL CURRENCYLOCAL GOVERNMENTLOCAL GOVERNMENTSLONG-TERM INTERESTLONG-TERM INTEREST RATESMACROECONOMIC POLICIESMARKET ACCESSMARKET CONDITIONSMARKET CONTAGIONMARKET EXPECTATIONSMARKET TRANSPARENCYMATURITIESMIDDLE-INCOME COUNTRIESMONETARY FUNDMONETARY POLICYMULTINATIONAL CORPORATIONSNATURAL RESOURCESNET CAPITALNON-PERFORMING LOANSOUTPUTOUTPUT GAPSPORTFOLIOPORTFOLIO FLOWSPORTFOLIO INVESTMENTPORTFOLIO INVESTMENTSPRIMARY MARKETPRINCIPAL PAYMENTSPRIVATE CAPITALPRIVATE DEBTPRIVATE LOANSPUBLIC DEBTREAL INTERESTREAL INTEREST RATEREAL INTEREST RATESREGULATORY ENVIRONMENTREMITTANCEREPAYMENTREPAYMENTSRESERVERESERVE BANKRESERVESRETURNRETURNSRISK AVERSIONRISK PROFILESECURITIESSHORT-TERM DEBTSOVEREIGN BONDSOVEREIGN BOND MARKETSSOVEREIGN BONDSSOVEREIGN DEBTSOVEREIGN DEBT MARKETSSOVEREIGN DEFAULTSTOCK INDEXSTOCK MARKETSTOCK MARKET INDICESSTOCK MARKET VOLATILITYSTOCK MARKETSSTOCK OPTIONSTOTAL DEBTTRADE FINANCINGTRADINGTREASURIESTREASURYTREASURY BONDSTREASURY YIELDTREASURY YIELDSYIELD CURVE10.1596/21525