The 2008 financial crisis and worldwide recession halted a three-decade expansion of global capital and banking markets. Two years later, growth resumed, fueled not only by expansion in developing economies but also by a $4.4 trillion increase in sovereign debt. The total value of the world’s financial stock, comprising equity market capitalization and outstanding bonds and loans, increased from $175 trillion in 2008 to $212 trillion at the end of 2010, surpassing the previous 2007 peak, according to new research from the McKinsey Global Institute (MGI). Similarly, cross-border capital flows grew to $4.4 trillion in 2010 after declining for the two previous years. Still, the recovery of financial markets remains uneven across geographies and asset classes. Emerging markets account for a disproportionate share of growth in the raising of capital as mature economies struggle to resume economic growth. Moreover, one-third of overall growth comes from increasing government debt.

In the research update Mapping global capital markets 2011, MGI provides a fact base on how the world’s financial markets are recovering. The report draws on refreshed data from three proprietary databases that cover the financial assets, cross-border capital flows, and foreign investments of more than 75 countries through the end...