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Global Economic Prospects : Financial Markets Outlook, June 2014External 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.
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Does Foreign Portfolio Investment Reach Small Listed Firms?Using a unique dataset, the author examines the impact of foreign portfolio investment on the capital issuance behavior of small listed firms. The author finds that foreign portfolio investment is associated with an increased probability of small firm security issuance in all nations, regardless of property rights development. Evidence suggests the mechanism by which this occurs is a freeing up of capital in domestic markets when large firms utilize the foreign investment directly. Debt levels in nations where property rights are more developed increase, suggesting that foreign portfolio investment may reach small firms through the banking channel as well as capital markets in these nations.
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Global Development Finance 2010 : External Debt of Developing CountriesThe World Bank's Debtor Reporting System (DRS), from which the aggregates and country tables presented in this report are drawn, was established in 1951. The debt crisis of the 1980s brought increased attention to debt statistics and to the world debt tables, the predecessor to global development finance. Now the global financial crisis has once again heightened awareness in developing countries of the importance of managing their external obligations. Central to this process is the measurement and monitoring of external debt stocks and flows in a coordinated and comprehensive way. The initial objective of the DRS was to support the World Bank's assessment of the creditworthiness of its borrowers. But it has grown as a tool to inform developing countries and the international community of trends in external financing and as a standard for the concepts and definitions on which countries can base their own debt management systems. Over the years the external financing options available to developing countries have evolved and expanded, and so too has the demand for timely and relevant data to measure the activity of public and private sector borrowers and creditors. Recurrent debt crises caused by adverse global economic conditions or poor economic management have demanded solutions, including debt restructuring and, in the case of the poorest, most highly indebted countries, outright debt forgiveness, formulated on the basis of detailed and robust information on external obligations. Steps are continuously being taken to ensure that the data captured by the DRS mirrors these developments and responds to the needs of debt managers and analysts. In this context reporting requirements are periodically amended to reflect changes in borrowing patterns. Many developing countries increasingly rely on financing raised in domestic markets, and so we are exploring ways to expand the coverage of public sector borrowing in domestic markets.