Now, one implication of the absence of a modern financial system in many emerging markets is precisely that it helps explain the current “unorthodox’’ constellation of global financial flows. Since the locally underdeveloped financial systems are not sufficiently capable of channelling savings internally, this gives rise to net capital flows from emerging to mature economies.
According to this view, an important factor in the adjustment of the existing global imbalances therefore resides in the deepening of financial systems in emerging markets.