Role Of Financial Globalisation

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1. Introduction Financial globalization is best defined as the assimilation of the global financial markets/institutions and a states regional financial system. Because of this assimilation the government is required to liberalise capital accounts and local financial sectors. The intergration of these markets and systems results in liberalized economies going through an increased cross country capital movement which inloves local borrowers and lenders activively participating in the global markets and the use of international financial liaisons. Middle incomed countries have now become the second most active participators in financial globalisation. The essay begins by defining financialization in great detail and later moves on to discuss…show more content…
One of the main actor is the government because they are the ones who allow this globalization of the finance sector by loosening local financial sector restrictions and the “capital account of the balance of payments”. Historically, domestic financial sectors where regulated by the governments when they would closely watch credit allocations through the regulations on quantities and prices. Cross country capital movements, bank and corporation lending/borrowing activities and foreign investors who participated in the domestic financial system were also regulated, but over time as Kaminsky and Schmukler (2002) these restrictions were gradually reduced or abolished. Some restrictions however have been readopted before as in the case of the aftermath of Argentine crisis in the 1990s and the debt crisis of 1982. Bot investors and borrows(firms and households) have also now become the main financialization agents brcasue when they borrow money overseas theey are able to lessen financial restrictions to investments. Firms can reduce capital costs by raising funds through equities and bonds in the global market and in doing so can increase finance alternatives which aid foreign investors to overcome both indirect and direct investments, this also expands their…show more content…
These NFC rae pressurized to both make payements and also increase stock price values. Financial markets requires an increase in income and also stock prices even though it may be difficult get profit due to the slow paced growth of the economy and competituion in the product market to which Crotty (2002: 4) called ‘neoliberal’ paradox. In response these NFC went ahead and reduced employee wages and benefits, took part in illicit dealings to increase and swapped to operate financially in order to increase profits. Financialisation , globalisation and neoliberalism therefore has impacted negatively on economic prosperity prospects. Parenteau (2005: 111) termed the 1990 financial bubble as “financialization in the extreme”, he stated that financial incentive motives and fundamental changes in insttitutions are what caused the detrimental bubble. Some of the main causes was due to the U.S. saving system becoming increasingly privatised causing investors to set their targets towards higher returns and hazardous investments and also a small division of financial capital rising topower, Parenteau called this the “Wall Street Finance”, they had the power to influence who were able to influence central and supervisory bank policies which protected

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