The Globalization of Finance : Opportunities and Challenges

Now that globalization is in the air, it is discernible in various forms and assuming varying contacts and ramifications. Globalization already affects national treatment and practice. It raises a number of questions that cannot be readily and easily answered. In particular, the globalization of finance has created a significant evolution of the international financial system in recent years. The information revolution has reduced the costs of borrowing and lending across traditional national boundaries and thereby led to a dramatic expansion of cross-border financial flows. Notably, global financial integration has eroded economic and regulatory barriers to competition across the marketplace for financial services. The growing global financial system is demonstrated to be far more efficient today than ever before in that it has significantly facilitated cross-border trade in goods and services, and thus has substantially contributed to standards of living worldwide. However, as shown in the recent financial crisis episodes in East Asia and Mexico, the globalization of finance has become a challenge to the participants of the financial markets. In this regard, this paper analyzes the process of financial globalization to better understand how the global financial community can maximize the benefits from the globalization of finance while recognizing the challenges.