The Evidence and Impact of Financial Globalization in the World
One of the benefits of financial globalization .is the fact that financial incorporation through wider access to trade instruments allows nations to diversify business risks. Apart from this, the foreign capital enjoyed by nations under a trading umbrella allows their entrepreneurs to import or export knowledge and technology so as to help boost productivity in their respective nations. Also, financial globalization principles allows foreign entrepreneurs to undertake business in capital and banking markets hence help in boosting the quality of financial services.
On the contrary, financial globalization has its own drawbacks. For instance, as nations get into trade ties with global financial systems, unfavorable financial shocks in one nation may be absorbed by another in form of contagion effects which may easily drag a country’s stable economy to a catastrophe. “Globalization also poses complications on the operations of banks and other businesses as it complicates the management of exterior resources and liabilities” (Cline, 2010).
In an effort to manage the negative effects posed by financial globalization, governments all over the world have developed multifaceted networks with the sole purpose of averting negative financial effects posed by financial crises. The roles of such networks put forth by governments include oversight, monetary regulation, and lending. However, such interventions have rarely worked towards averting financial crises to the expectation of many nations.