The Impact Of Sovereign Wealth Funds On International Financial Stability
Source: Bank of Canada
Over the recent period, many emerging-market economies and commodity-exporting nations have experienced unprecedented growth and accumulated substantial amounts of foreign exchange reserves. The management of these foreign reserves has led to the emergence of important financial actors: Sovereign Wealth Funds (SWFs). While SWFs have existed in one form or another since the 1950s, they have recently risen in prominence and been exposed to public scrutiny and debate. The author outlines their possible impact on international financial stability. The author concludes that SWFs are long-term investors that can play a stabilizing role in financial markets by supplying liquidity and reducing market volatility.