PhD, associated professor of the finance,
credit and insurance department
Lviv academy of commerce
THEORETICAL FOUNDATIONS FOR DEFINITION OF FINANCIAL GLOBALIZATION
Today, the global economic system, like never before, feels the effects of globalization in all spheres of social and economic relations. Special attention is focused on scientific research of some varieties of globalization that have the most significant impact, particularly issues of deepening of the financial globalization. Financial globalization has been one of the most intensely debated topics of our times, so it is very actual to observe the definition of financial globalization through analysis of different scientists’ approaches.
Financial globalization as defined by the IMF analysts [2, p. 8] is a complex, multidimensional concept, which should be understood in the growth of global communications through cross-border financial flows. The current wave of financial globalization goes back to the 1980s. And it is characterized by significant amounts of capital moving between countries with different levels of development, mainly between highly developed and developing countries. Prasad Eswar S., Rogoff K., Shang-Jin Wei and M. Ayhan Kose study financial globalization in a comparison with financial integration. Scientists argue that these concepts are, in principle, different. Financial globalization is an aggregate concept that refers to rising global linkages through cross-border financial flows. Financial integration refers to an individual country’s linkages to international capital markets . We completely agree with their approach, also we must note, that financial globalization is obvious closely related to financial integration.
Due to S. Schmukler approach, financial globalization is understood as the integration of a country’s local financial system with international financial markets and institutions . Instead, P. Arestis notes that financial globalization is higher stage of internationalization of activity of the financial markets in all its forms for the purpose of ensuring requirements of development of the currency and financial relations .
The concept of financial globalization can be expressed in the following aspects [3, p. 4; 4]:
1. Financial globalization is part of economic globalization, which is an increasing economic interdependence of countries around the world and by the growing volume of cross-border transactions of goods, services and capital, the rapid and widespread diffusion of technologies.
2. Financial globalization has become the dominant form of economic globalization. Capital was the most mobile factors of production, which allowed him to move quickly in search of profits great facilitate this process contributed to the liberalization of capital movements. A role in enhancing the mobility of capital has the information revolution, manifested not only in the broad introduction of means of communication and information, but also in creating new channels of capital flows.
3. Financial globalization has changed the composition and structure of entities that affect the world economy, putting in first place the transnational companies and banks, reducing the role of the national State and exposing the inadequacy of international financial institutions for the new challenges of development of the world economy. The consequence of these changes has been the loss of the State many of the regulatory instruments and reduced effectiveness of monetary and fiscal measures. This gave rise to talk about the transformation of national financial systems under the impact of financial globalization.
Financial globalization undoubtedly has a positive impact on economic growth. This influence spread through multiple direct channels: an increase in domestic savings, lower capital costs through more efficient allocation of risks, transfer of technology, financial sector development. By indirect effects include the following channels of distribution as [6, p. 4]: promoting specialization, incentives to optimize policy, increasing capital inflows. However, besides the positive effects of financial globalization is and negative aspects. In particular, financial globalization deepens the quality problems of integration of international financial systems. Financial globalization for countries that are at the initial stage of financial integration can cause financial crises. An example of this is the destructive influence of the crisis in Asia and Russia (1997-1998), Brazil (1999), Ecuador (2000), Turkey and Argentina (2001), Uruguay (2002) and so on.
Therefore, financial globalization it is a very complex concept that means the development of financial markets and intensive movement of financial assets that cross country borders. For financial globalization significant importance has moving of money from country to country. The export of capital across national borders is the most powerful factor in the deepening of financial globalization, convergence of development of various countries, creating an atmosphere of mutual trust and respect of interests in the international environment. It should be noted that exports of capital are possible only if the economy of the exporting country make savings, which can be transformed into capital for both domestic and foreign investment. Without the creation of free financial resources in a certain range, financial globalization cannot develop. Moreover, financial globalization is also a fascinating topic to study for researchers of development economics not only because of its compelling policy relevance but also because of the enormous variation of approaches and experiences across countries.
- Arestis P. Basu Santonu, Financial Globalization and Regulation / P. Arestis // The Levy Economics Institute of Bard College, Working Paper No. 397, December 2003: Available at: http://www.levyinstitute.org/pubs/wp397.pdf.
- Effects of Financial Globalization on Developing Countries: Some Empirical Evidence [Text] / E. Prasad, K. Rogoff, Shang-Jin Wei, M. Ayhan Kose // International Monetary Fund. – March 17, 2003. – 86 pp.
- Evlakhova, Yu.S. Henezys kontseptsyy fynansovoi hlobalyzatsyy [Genesisof financial globalization concept], Journal of Financial Research. – 2007: Available at : http://finis.rsue.ru/2007-4/Evlah.pdf.
- Luchyshyn Z. Asymetriia finansovoi hlobalizatsii [Asymmetry of financial globalization] / Z. Luchyshyn : Available at: http://soskin.info/ea/2006/7-8/20060712.html
- Prasad Eswar S. Financial globalization, growth, and volatility in developing countries / Prasad Eswar S., Rogoff K., Shang-Jin Wei, M. Ayhan Kose // Globalization and Poverty: Available at: http://www.nber.org/chapters/ c0114.pdf.
- Schmukler, S. L. Benefits and Risks of Financial Globalization: Challenges for Developing Countries [Text] / S. L. Schmukler // Development Research Group. – World Bank. – June 2004. – 28 pp.
- Schmukler, S. L. Financial Globalization: Gain and Pain for Developing Countries / S. L. Schmukler // Federal Reserve Bank of Atlanta Economic Review, Second Quarter: Available at: http://www.frbatlanta.org/filelegacydocs/ erq204_schmukler.pdf.