ABSTRACT
Portfolio capital is comprised mostly of banking flows and securities transactions. The degree of liquidity varies with financial instrument, but many have highly developed secondary markets, the one exception being debt of developing countries. The international economic events are intricately linked with the rapid growth of capital mobility. Japan has been one of the most reluctant deregulators, preferring capital controls which in turn affect currency values. The initial surge in international capital stormed from excess US dollar liabilities abroad and the creation of the Eurodollar market, both in the 1960s. The United States is the largest player in the international bond market, owing to the size of the US economy and to the net deficit in domestic US savings. Beginning in the 1970s, banks were faced with declining opportunities and increased competition at home, a need to provide more services to their major clients, and finally a need to recycle billions of petro-dollars through the maturing Eurodollar market.
