Should Emerging Market Economies Embrace Market Liberalisation Reforms?

2) Interest rate parity (how exchange rate is determined by the flows of capital) and

Financial - emergence of worldwide financial markets and better access to external financing for borrowers. By early 21st century it was possible to trade more than $1.5 trillion in national currencies on a daily basis due to expansion in trade and investment.. the rapid growth of these worldwide structures led to increased instability of financial structure globally (Greenspan, 2009). The following economic conditions of globalization aids successful business.

Kvint (2008) indicates that some statistics of reports on emerging market are contradictory, and this inconsistent situation even can be seen from IMF’s reports. For instance, some emerging countries like China and India are classified as emerging markets and are included in the category of developing countries. On the other hand, many of the sub-Saharan countries as emerging markets are definitely still undeveloped. Kvint (2008) suggests that the main and most important characteristic of all emerging market countries is that they are at some stage during the processes of economic maturation and development of free markets. An attractive environment for foreign investors and global trading has been created based on this characteristic. He suggests the main characteristics in his study:

The early 1990s exhibited a boom in many economies throughout the world due to factors such as globalization and other trade liberalization practices, but this boom was quickly halted in the latter half of the decade when bad investments nearly sent the entire world into economic turmoil. With the introduction of free trade practices such as the North American Free Trade Agreement, or NAFTA, the economies of many of the worlds “developing countries” skyrocketed due to an influx of foreign investment. At, first this exponential boom in small countries with emerging economies seemed like it would never end. However, this all changed when investors “caught wind” that these developing countries did not have the means to keep up with the massive inflow of investments. This led to what we know refer to today as the Asian Financial Credit Crisis. In order to understand how to prevent such a disaster from happening again, we must first examine how exactly this event was triggered, and what should have been done differently.

Title I sets a closer look and evaluation of domestics and international financial institutions to achieve better control over the financial stability and finding better and more efficient ways to overlook the of the country finding more efficient ways. Monitor.

One cannot say that U.S banking system is designed to fail; however, it is the relentless deregulation in the financial sector and competing for financial sector activities in the globalized financial market as means towards higher growth resulted in its instability over the centuries. The U.S. central bank and federal government did not see the impending crisis on the horizon due to the deregulation of financial market. The central bank believed that there could be evolving economic imbalances or risk in the financial markets, but that these were best managed by market forces themselves. But they failed to realize that some time market fails on its own. Deregulation of the financial sector was initiated and reinforced through legislative changes, followed by regulatory policies consistent with the philosophy of deregulation. As the US was losing comparative advantage in agriculture, manufacturing, and services to developing and emerging market economies, while they continued to have advantage in the financial sector. Hence, the United States perhaps felt that national interest lies in their dominating financial sector activity, and hence development of the financial sector was coterminous with their national interest. This approach could have led to a race to the bottom in financial sector regulation in their jurisdiction. The US banking system and financial sector was source of so much instability was due to relentless deregulation of the financial market.

This essay sets out to answer Ismail’s question and give a better understanding of the term financialization. Firstly various view points and opinions of the academia, economic journalist, politicians and analyst in mainstream finance will be reviewed

Financial regulation is necessary and without an efficient set of regulations a country could see rises in unemployment, interest rates, and the deterioration of financial intermediaries. With the globalization of the financial industry, it becomes more and more common for businesses to seek financing outside of their county 's boarders. These innovations in the financial industry stress why it is so important for regulations to be created and changed to reduce risk and asymmetric information in financial systems.

Financial Instability The soaring volume of international finance and increased interdependence in recent decades has increased concerns about volatility and threats of a financial crisis. This has led many to investigate and analyze the origins, transmission, effects and policies aimed to impede financial instability. This paper argues that financial liberalization and speculation are the most reflective explanations for instability in financial markets and that financial instability is likely to be transmitted globally with far reaching implications on real sector performance. I conclude the paper with the argument that a global transaction tax would be the most effective policy to curb financial instability and that other proposed

The government in most developing countries intervened to provide more socially-optimal levels of capital, synchronized with government development planes, and to provide finance for government budget deficits through domestic financial markets (Alam,1989;Amsden,1989; Bradford,1986,1987;Cho and Kin 1991; johnson,1985; and Lee,1992).The financial regulations were designed and implemented to restrain market forces in the allocation of resources , to encourage economic growth ,ensure financial stability and achieve other national goals.

dollar. In dollarization, the country abolishes its own currency and uses a foreign currency, such as the U.S. dollar, for all domestic transactions. 6. Emerging market exchange rate regimes. High capital mobility is forcing emerging market nations to choose between free-floating regimes and currency board or dollarization regimes. What are the main outcomes of each of these regimes from the perspective of emerging market nations? There is no doubt that for many emerging markets a currency board, dollarization, and freely-floating exchange rate regimes are all extremes. In fact, many experts feel that the global financial marketplace will drive more and more emerging market nations towards one of these extremes. As illustrated by Exhibit 2.5, there is a distinct lack of “middle ground” left between rigidly fixed and freely floating. In anecdotal support of this argument, a poll of the general population in Mexico in 1999 indicated that 9 out of 10 people would prefer dollarization over a floating-rate peso. Clearly, there are many in the emerging markets of the world who have little faith in their leadership and institutions to implement an effective exchange rate policy.

Today, it is considered to be a common knowledge, that the deregulation of domestic financial sector and opening of capital account of the balance of payments played a major role in the recent economic crisis of 2007-08. Policies, that have been stated above can be put together and named as the liberalization of the capital account. Liberalization stands for lessening of government regulations and restrictions in the economy. It offers a certain sector of the economy an opportunity to compete internationally. However, there are a number of risks connected with liberalization, which will be discussed later in this paper. Thus, the question is as follows: is liberalization worth the risk, or a wise implementation of capital controls leads to potentially more positive outcomes for the global economy?

An emerging market is a country that goes through a process of rapid growth when it comes to industry and economy, nevertheless, it does not meet certain qualities to be considered a fully developed market. As any other financial activity, investing in emerging markets has its advantages and disadvantages. According to Investopedia. (2016) , “Emerging markets are sought by investors for the prospect of high returns, as they often experience faster economic growth as measured by GDP”. A considerable option is the secondary emerging market Argentina, due to its rapid development in manufacturing and more industries that are leading the economy in the country.

The global financial marketplace is a maze, a tumor, a mess. Scholars are trying to understand this complex system which remains extremely interconnected due to globalization over time. It is extremely important to understand the marketplace because it has an effect on the whole entire world. This marketplace also needs regulations to protect consumers who end up suffering as a result of poor decision-making by financial institutions. The financial marketplace over time has become more and more regulated but still, there is more that needs to be done, both domestically and internationally. How many crises is it going to take for an increase in regulations? There has been the crisis in Thailand, on July 2, 1997, the series of Latin American

Globalization is the process of integrating various economies of world without creating any hindrances in the flow of goods and services, technology, capital, and even labor or human capital. The term globalization means to permit the free flow of goods and services in the world. To create an environment in which free flow of capital can take place among nation states, an environment permitting free flow of technology and from the point of view of developing countries, creation of environment in which free movement of labor can take place in different countries of the world.