This semiannual report examines the emerging challenges of living in new financially globalized world in the aftermath of the 2008-09 global financial crisis for Latin America and the Caribbean (LAC) countries. This report starts by setting the stage on the external environment, it provides an overview of recent economic developments and the prospects for the LAC region. Chapter 1 then provides an in-depth look at new patterns of financial globalization that underpin the financial volatility by analyzing the new dynamics in gross capital flows (whose size dwarfs that of the more commonly studied net capital flows). It also examines the transmission of external shocks through the financial channel across LAC countries and emerging markets more broadly by delving into the incentives and behavior of the international asset management industry.
