Article on financial liberalisation

GLOBALISATION OF FINANCIAL MARKETS Considering the fact that financial markets are a fully integrated market , liberalising/ globalising it would further pave the way for stimulating greater dynamism and innovation . However , certain areas which were financially globalised , led to speculation and ruin . In the case of Sub-prime mortgage crisis in US , speculative borrowing in residential real estate has been cited as a contributing factor.This has led to adverse consequences for banks and financial institutions across the globe . It all revolves around the behavioural attitude of consumers , who are so called economic agents . In western countries , people always tend to borrow and spend more , rather than reserving funds . Finally they become “fish in troubled waters” , having no scope for improvement . There are umptin advantages that financial globalisation can provide , provided there is no information asymmetry . Financial globalisation has always led to adding credibility to the financial framework (or) system of a country . Governments should regulate policies from time to time and pass on special reforms . Failure to abide by the prudential regulations in some key areas can lead to bank failures and systemic instability . It is therefore in the hands of the economic agents to realise the need for “elimination of speculative thinking” . Awareness about the positives of financial liberalisation should be wide spread for it helps in increasing the availability of funds , and improving the financial infrastructure . Central bodies should impart necessary awareness about economic cycles and positives of liberalisation either in financial sector or any others , to public from time to time . This suggestion may be far fetching , but it atleast eliminates the causes of recession and other sub zero grade issues rooting to failure of economy . Having discussed all the above , it is much visible that Financial globalisation is definitely a boon and not a bane unless proper measures are adopted!! PARTHIBEN SIVAPRAKASAM 2010 Copyright @ Parthiben Sivaprakasam 1