International Financial Flows in the New Normal: Key Patterns (and Why We Should Care)
08 July 2016 12:00 pm
Natacha Valla, European Investment Bank
wiiw, Rahlgasse 3, 1060 Vienna, library (2nd floor)
Recent trends in international financial flows have been subject to conflicting commentaries and views. But it is worth stepping back from short term, volatile developments in capital flows between emerging markets and developed economies. Based on a newly assembled dataset covering 40 advanced and emerging countries, this seminar will compare the period since 2012 with the pre-crisis period and highlight four key stylized facts. First, the “Great Retrenchment” that took place during the crisis has proved very persistent, and world financial flows are now down to half their pre-crisis levels. Second, this fall can predominantly be related to advanced economies, especially those in Western Europe, while emerging markets, except Eastern European countries, have been less severely affected until recently. Third, the global patterns of net flows have also recorded significant changes. Overall, net flows have fallen substantially relative to the years preceding the sudden stop, which is to some extent an expression of the changes registered in the current account. Fourth, not all types of flows have shown the same degree of resilience, resulting in a profound change in the composition of international financial flows: while banking flows, which used to account for the largest share of the total before 2008, have collapsed, FDI flows have been barely affected and now represent roughly 45% of global flows. Portfolio flows stand between these two extremes, and within them equity flows have proved more robust than debt flows, which should help to strengthen resilience and deliver genuine cross-border risk-sharing.
Since December 2015 Natacha Valla is in charge of Economic Policy and Strategy at the European Investment Bank, on leave from her position as Deputy Director of CEPII (think tank in International Economics), where she also heads the scientific programme “International Macroeconomics and Finance” She is also a member ad personae of the Commission Economique de la Nation (nominated advisory group to the Finance Minister), the Conseil d’Analyse Economique (independent advisory group to the Prime Minister), the scientific committee of the French banking supervisory and resolution body (ACPR), and the board of SUERF (European Money and Finance Forum). She recurrently appears in national and international media. Between 2008 and 2014, Natacha Valla was Executive Director at Goldman Sachs Global Economic Research, where her focus was on macroeconomic and financial developments in the euro area. She worked as an economist at the European Central Bank between 2001 and 2008. She has also lectured international economics at Sciences-Po Paris, the Universities of Florence, Paris-Dauphine and H.E.C. and served as a consultant to the IMF and the OECD. Her publications and scientific contributions focus on macroeconomics, international capital flows, economic policy, financial stability, banking and financial markets, and monetary policy. She received a PhD in Economics from the European University Institute (Florence) in 2003.