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The Implications of global financial markets
Increase in domestic investments
Domestic investments across several countries have grown in insurmountable amounts. this is due to the fact that foreign direct investment is generated from partnership with global investors who help make use of the available economic opportunities.
Increased global liquidity
More financial capital flows i.e the inflows and outflows are made possible. This increases the responsiveness of a country's financial decisions by ensuring that the policies become more effective and fast in response.
Financial economic risks
The strong integration between several countries makes sure that any decision made by a strong economy country is bound to impact their economic partners and trade partners too. For instance, the alteration of the prevailing interest rates in country A would lead to a spiraling change in the country B's interest rates if country B wishes to maintain a sustainable exchange rate system and favorable balance of payments. This therefore increases the risks of external vulnerabilities of any nation that is financially integrated with others.
There is no possibility for a worldwide global situation. many countries are always employing efforts to avoid absorbing the negative impacts of the financial decisions in other countries. The fear of financial uncertainty and capital outflows therefore ensures that no country will allow the external economy to dictate its financial course.
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Sep 20th, 2015
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