Capital inflows not only supplemented domestic investment funds, but also facilitated the transfer of industrial technology and know-how. In this context, derivatives enabled the unbundling of various risks embedded in economic transactions and the transfer of risks to other market participants. Such opportunities should have mitigated the perception of high risks associated with investments in emerging market economies and stimulated investments.
Meanwhile, in a broader context, market discipline is also enforced through global market activities. Those that succeed in maintaining sound economic performance through determined efforts of restructuring, be they firms, financial institutions, or sovereign states, would be rewarded by the markets in the form of narrower credit spreads and thus lower funding costs.