The global capital market: Supply, demand, pricing, and allocation

By Lowell Bryan, Bill Lewis, Diana Farrell, Kevin Berner, Isobel Coleman, Jeremy Dann, Yuko Kawamoto, Scott Newman, et al.
The global capital market: Supply, demand, pricing, and allocation

This report suggests that a global capital market is forming, one that moves capital efficiently across national borders to meet demand in other parts of the world. Our research indicates potential for a "coincidence of needs" between developed and developing economies that can promote prosperity for both.

This report suggests that a global capital market is forming, one that moves capital efficiently across national borders to meet demand in other parts of the world. Our research indicates potential for a "coincidence of needs" between developed and developing economies that can promote prosperity for both.

Capital demand and supply

Developing countries can grow rapidly if they are able to attract the necessary capital and know-how. Global capital has flowed to countries that not only pursue policies that enhance the economic and political environment for business, but also develop a good financial policy and infrastructure.

The global capital market

While the markets for money, foreign exchange, and bonds have already become global, the equities' markets are only now in the process of globalizing. Moreover, as bank deposits continue to be securitized around the world, more and more of the flow of funds in the economies of the developed world will be in instruments which can be traded and thereby linked directly to the global capital market.

Potential outcomes and implications for policy

Higher household savings rates of an aging developed world will likely increase financial assets being channeled through a mature, integrated global capital market to the best opportunities in the world. MGI also sees the potential for the global capital market to act as a powerful check on the tendency of governments in the developed world to issue debt to fund increased consumption in the form of entitlement programs.

Appendix

MGI used a modified version of the US General Accounting Office for a simulation model, with an array of features sets for base runs.

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