The Impact Of Financial Globalization
Financial globalization is the extent to which a country is linked to others through cross-border financial holdings. According to IMF (2007), it is the sum of a country’s gross external assets and liabilities relative to its GDP, while financial integration is the inter-linkage between a country’s financial systems with those of others. However, both financial globalization and financial integration can be used interchangeably. On the other hand, economic developed is economic growth, accompanied by transformations in citizens’ livelihoods. Financial globalization has been growing a fast rate due to advancements in Information, Communication and Technology (ICT) and the liberalization of national, financial and capital markets (IMF, 2007). Grants, loans and Foreign Direct Investments (FDIs) have been the most pronounced ways through which financial globalization has taken effect. Interestingly, developing countries have been found not to be integrated into the financial systems, making them not to reap the benefits associated. Coupled with sound macroeconomic policies and good governance, financial globalization is conducive for economic development. It is expected that financial globalization is positively associated with enhancement of financial risks, reduction of macroeconomic instability, hence fostering economic development. However, available empirical evidence has suggested that this is the case for developed countries with developed financial systems (IMF, 2007;
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