A narrower but timelier measure of demand for emerging market assets – net inflows to equity and bond funds investing in emerging markets, shown in figure 7 – suggests that inflows of capital to emerging market economies have indeed picked up in recent months.
To a large degree, these capital flows have been driven by perceived return differentials that favor emerging markets, resulting from factors such as stronger expected growth – both in the short term and in the longer run – and higher interest rates, which reflect differences in policy settings as well as other forces.