“the Rapid Expansion of International Financial Market Since Early 1980s Have Integrated the World Economy”. Discuss.
“The rapid expansion of international financial market since early 1980s have integrated the world economy”. Discuss.
The international financial system is a structure of markets within which organizations and individuals trade to support economic commitments made across national borders where buyers and sellers participate in the trade of assets such as equities, bonds, currencies and derivatives. Financial markets are typically defined by having transparent pricing, basic regulations on trading, costs and fees and market forces determining the prices of securities that trade. The international financial market expands rapidly including money and derivatives since early 1980s. The increased integration of financial systems has involved greater cross-border capital flows, tighter links among financial markets, and greater presence of foreign financial firms around the world. The expansion in international financial market also means that establishment and expansion of international investment banks/ firms such as Crosby, Morgan Stanley, JP Morgan, UBS, Franklin, Templeton, Barney & Smith, Union Bank in Swiss etc. Such firms created varieties of investment fund such as hedge fund and mutual trusts. The expansion of such investment funds has enhanced volume of foreign policy initiative (FPI) in the world economy.
The role of short term (mainly portfolio capital) increased in world economy. Capital in the international financial market can be classified into two types, which is short-term Intra-Bank Loan, which maturity less than one year and portfolio investment (investment in money, bond, stock and derivatives). Mobility of these investment very high, outflow and inflow very fast. Besides that, volume of short-term capital mobility (STC) also increased dramatically in the world economy. Currency used in trading in international capital market which dominated by industrial/rich nations are in US Dollar (US$), DM/Euro and Yen. US dollar is the main vehicle
The international financial system is a structure of markets within which organizations and individuals trade to support economic commitments made across national borders where buyers and sellers participate in the trade of assets such as equities, bonds, currencies and derivatives. Financial markets are typically defined by having transparent pricing, basic regulations on trading, costs and fees and market forces determining the prices of securities that trade. The international financial market expands rapidly including money and derivatives since early 1980s. The increased integration of financial systems has involved greater cross-border capital flows, tighter links among financial markets, and greater presence of foreign financial firms around the world. The expansion in international financial market also means that establishment and expansion of international investment banks/ firms such as Crosby, Morgan Stanley, JP Morgan, UBS, Franklin, Templeton, Barney & Smith, Union Bank in Swiss etc. Such firms created varieties of investment fund such as hedge fund and mutual trusts. The expansion of such investment funds has enhanced volume of foreign policy initiative (FPI) in the world economy.
The role of short term (mainly portfolio capital) increased in world economy. Capital in the international financial market can be classified into two types, which is short-term Intra-Bank Loan, which maturity less than one year and portfolio investment (investment in money, bond, stock and derivatives). Mobility of these investment very high, outflow and inflow very fast. Besides that, volume of short-term capital mobility (STC) also increased dramatically in the world economy. Currency used in trading in international capital market which dominated by industrial/rich nations are in US Dollar (US$), DM/Euro and Yen. US dollar is the main vehicle
References: Stijn Claessens and Sergio L. Schmukler. (2007). IMF Working Paper: International Financial Integration through Equity Markets: Which Firms from Which Countries Go Global? Retrieved from http://www.imf.org/external/pubs/ft/wp/2007/wp07138.pdf Otmar Issing. (2000). The globalisation of financial markets. Retrieved, from http://www.ecb.int/press/key/date/2000/html/sp000912_2.en.html Fukao. M and Hanazaki. M. Internationalisation of Financial Markets and The Allocation of Capital. Retrieved from www.oecd.org/dataoecd/21/19/35589290.pdf Roy C. S. Globalisation of Financial Market. Chapter 1: Integration of World Financial Markets: Past, Present, and Future. Retrieved from http://media.wiley.com/product_data/excerpt/10/04712292/0471229210.pdf Rodrigo, d, R. (2007) International Monetary fund. Economic Growth and Financial Market Development: A Strengthening Integration.Retrievedfrom http://www.imf.org/external/np/speeches/2007/082207.htm