hile it might seem that profit rates would have been higher in the developing countries, capital largely shunned the Southern Hemisphere until the emerging market boom of the 1990s. This was counter to traditional economic logic as the classical function of international capital markets was to allocate funds to areas of highest return. Turner (1991) argues that the explanation for this inflow to industrialized nations could be found in the depth of U.S. capital markets, which apparently helped to pervert the allocation of capital as well as to lubricate it.
RECENT CAPITAL FLOWS TO EMERGING MARKETS
In the 1990s, the pattern of capital flows changed dramatically, and beginning in 1990, there was an extraordinary increase in flows, particularly in Asia. By the mid-1990s, developing countries were receiving 40 percent of global foreign direct investment, compared with 15 percent in 1990, and accounted for 30 percent of global portfoli
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