Globalization and Internation Financial Crisis Essay

Globalization and Internation Financial Crisis - Essay Example This consolidation of global relationships is at the level of  individuals,  companies,  institutions  and countries (Campenhout and Cassimon, 2012).  The main causes of the process of globalization are the  technical progress in the communications and transportation sections, as well as, the  political  decisions on  liberalization  of  world trade. The study of International Finance is of particular significance in today’s globalized financial marketplace. International finance is a branch of  international economics and focuses on the monetary side of the international  economy. The subject matter of international finance is useful for students of economics, finance and business studies.  Ã‚  It is theorized that increasing globalization has played a role in creation of a wave of international financial crises in contemporary times (Schmukler and Vesperoni, 2006). The paper critically evaluates the supposition of globalization’s role in in ternational financial crisis and assesses the question whether international financial stability is feasible in an increasingly globalised economy. In addition, the paper critically appraises international financial crisis and ensuing policy responses to maximize economic and welfare consequences.   Discussion The degree of change brought about by the globalization of financial systems has been termed as financial globalization  by several researchers. Globalization of financial systems leads to the creation of a regional market integration of external financing.  According to Mishkin (2009), the financial aspect of  globalization  has three dimensions: geographical aspect of financial globalization refers to mobility of capital from one country to another, functional aspect of globalization relates to  capital markets which are compartmentalized through shifts in money markets and  stock markets. Obadan (2006) mentions that under the influence of financial globalizati on, global financial institutions are created, as well, like the  IMF, World Bank  and the European Community. Globalization’s effect on international financial markets also includes deregulation, abolition of  exchange controls  and restrictions on capital movements. Globalization also encourages financial innovation, disintermediation and direct access operators to funding without going through  intermediaries (Cline, 2010). The impacts of globalization on the financial systems are dealt under heads: Market Development Financial globalization has facilitated the financing of companies and that the  balance of payments. This has eliminated barriers to capital flows and has given an unprecedented boost to  financial markets worldwide (Rose, Prasad and Terrones, 2009). Today financial information is processed and disseminated around the  world, which leads to increased speculations in the financial markets and a high  volatility  of  capital round the glo be.  This provides a flow of investment opportunities based on  economic factors (Mishkin, 2009). These effects are sometimes seen as uncontrollable by the regional banking system  and the  international fina