Question

What are the benefits from financial globalization? Would you expect that these benefits would be distributed equally across developed and developing economies? Why or why not?

Answer 1

Financial globalisation in simple terms can be explained as the integration and cooperation of financial institutions and intermediaries among all global economies. It includes movement of financial services accross all nations. The benefits of this are that it gives investors wide choice of investment and allows them to invest and take financial services offered by different nations. It allows different nations which are under domestic insecurity of taking money from its nation's financial institutions,   to take debt from different nation's financial institutions as now glabalisation of financial servies has enabled it. Globalisation has proved to reduce cost of borrowing and has helped to get low cost financial services. This globalisation has helped to purchase bonds and shares of a company of foreign country by another country. This globalisation has enabled access of financial markets to developing nations and emerging nations who are in need for capital which they aotherwise are unable to gather from domestic financial market. Financial globalisation is thought as to minimise the risk of contagion from abroad. The integration of financial globalisation would help to broaden the base of financial services thereby deepening of interdependance of nations and strengthen the financial sector.

Financial integration would definately help out developing nations to invest and get benefits of financial services of another nation. However equal distribution of this is a doubtful case as most of the developing nations and poor nation remain affected as a consequence of being dependent on another nation. It can be possible that at times poor nations which are emerging are being exploited in the global market. Hence this has both pros and cons. It is important that nations analyse and then take any step while availing benefit from global financial services. Developed and developing nations would get benefitted from financial globalisation but its equal distribution is a doubtful case as in many situations inequality persists.