What is the role of financial globalization?

Globalization also be seen as a process of increasing international integration in the economic, political, social and cultural fields, which act beyond national borders and affects the outcome of the national ceiling. This interaction is in the form of an increase in the flow of goods and services, increased capital flows, increased cultural and political interaction, migration of people and many others.

Financial globalization can be said of financial integration in the geographical sense for states of the global financial sphere. Free flow of capital between countries, which is not the case a few years ago. Finance has created a trend towards the elimination of controls on transactions and capital account deregulation of financial markets, which has led to a change in communication technology and information. This change has allowed the creation of new financial products are complex and technical operations and instantaneous transmission of information from one country to another.

 This means that deregulation and liberalization of financial trading has been the driving force behind globalization, allowing capital mobility between different segments of the financial industry worldwide, with fewer restrictions and a better overview of investment opportunities. In light of this study globalization, finance has an important role to play. The purpose of this paper is to address the financial role in globalization and how it has affected the world economy. Several features have encouraged financial globalization. Geographical area covered by globalization has progressed. Globalization began in the 1970s in what is called the industrial world. In the second half of the 1980s began to spread to Latin America and East Asia, and in the 1990s to Central Europe and Russia.

There has been a substantial increase in external exposure of financial institutions. Bank to build this movement in the 1970s, with a gradual increase of external exposure, both in regard to assets and how they manage their financial operations, external exposure can mean transboundary or currency operations foreign. Institutional investors, insurance companies, investment funds and hedge funds that lasted from late 1980 onwards followed the bank. (Lamfalussy 2000; 69).

 Increased financial intermediaries, external exposure reflects each country .In terms of financial flows may have changed since 1980 is the comparison of cross-border transactions in bonds and equities time, which means they are gross purchase and sale of securities between residents and non-residents, as a percentage of GDP. From 1980-1997 this ratio jumped from 9 percent to 213 percent for the United States, from 8 percent to 96 percent for Japan, from 7 percent to 253 percent in Germany, and 5 per percent to 313 percent for France.

 Some other factors that have pushed globalization is trade finance, innovation, technology, risk and diversification.

 Commercial activity has increased considerably and also the volume and the average size of the financial transaction. This resulted in a dramatic volume flow of payments, both nationally and internationally. From 1975-1995, the ratio of the annual volume of funds transfers to GDP increased from 23 percent to 75 percent in the United States, 20 percent to 105 percent in Japan and 10 percent to 53 percent in Germany, both domestic and international markets (Lamfalussy 2000; 71).

 In the development process of globalization of financial markets in decades, advances in both technology and financial innovation plays a key role. In recent decades, the information system has been able to calculate and store data faster. Telecommunications networks have extended the results and increase their capacity while sharing practices more reliable data has been possible to connect a computing machine more efficiently. As a result, cross-border financial transactions has become both efficient easier and safer, lowering the barrier formed by the distance, if it is determined by the geography of other factors.

 During the last two decades, financial markets have become a breeding ground for a variety of rapidly evolving financial products, often described as derivatives. This product allows the borrower and the lender to adjust their risk exposure and adjust from time to time. With derivatives, the borrower and the lender to reduce some of the problems associated with asymmetric information in financial markets.

 In the last 50 years has increased the growth of the financial and industrial expansion of the company from a small garage for multinational companies. An example is Microsoft, Ford, Star Bucks, McDonalds is all multinational companies a chain of small shops began. Most companies today have branches worldwide. Finance plays an important role for multinational companies this paper.

 Financial globalization has allowed the deployment of a global currency to be an important international trade, international instruments and international interbank markets denominated debt vehicle. “This has led to the demand for liquid assets in all major currencies above and beyond the direct participation of key county own currency in international trade and capital flows” (Walter, 1991, p. 66) .

 Of course because of globalization, the amount of money now widely available outside their country of origin for the use of international transactions between nations and foreign countries. You can tell the currencies of internationalization “or currency substitution.

 As it is a financial advantage in globalization also has an effect and what deficiencies.

 One of the effects of financial globalization, multi-asset markets. According to (Cleaver 2002; 136). The main problem with this is’ how the central bank to control the money supply when the money itself may no longer be quite different. “In the financial market dealers to work with cash or treasury bills and commercial through the exchange of bonds, commercial paper, certificates of deposit and equity. from all this it is confirmed, liquidity can be easily converted into cash. short-term loans are very liquid as they can be paid very quickly. I Affirmed long term may also be liquid, as they have a high resale value.