What are the risks of integrated and largely unregulated capital markets for the global economy and...

What are the risks of integrated and largely unregulated capital markets for the global economy and ordinary people living around the world?

Expert Solution

The risks of the integrated and largely unregulated capital markets for the global economy and ordinary people living around the world are:

i. Since the economies are interconnected in the era of globalisation, the capital market crisis in one part of the economy can spread around the world very quickly. The example is the financial crash of 2008.

ii. The unregulared markets are more prone to formation of bubbles and when the bubbles burst, the effects are not good for the economy. The markets crash, the incomes dwindle and economy sets on the path of recession.

iii. The unregulated capital markets can also affect the exchange rates between countries tgrough the unregulated movement of the capital. This can be bad for the economy whose currency keeps depriciating due to this.

iv. Unregulated capital markets can lead to accumulation of unproductive investment which will not lead to any real production of goods and services in the economy and will be friutful in the long run.

Rahul Sunny answered 9 months ago

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