Financial Contagion and the Global Financial Crisis

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International Financial Market Student’s Name University/College International Financial Market Advantages of Financial Globalization Financial globalization has a number of advantages. First and foremost, it has improved the flow of capital from one country to another. This means it promoted different nations to engage in the international trade, thereby promoting development in such countries. On a similar note, it has not only allowed the capital to flow, but it has increased the amount of capital flow among nations (Stulz, 2005). As a result, it has, therefore, created a well-organized and efficient world allocation of money. Furthermore, it has had a positive impact on the standard of living of the people. Since it promotes the international trade, leading to improved economic growth and development, it has; therefore, changed the living standard of the citizens. A major point to note is that through financial globalization, countries’ national shocks have been safeguarded. Disadvantages of Financial Globalization Apart from the merits mentioned above, it is important also to note that financial globalization has its demerits. To start with, countries whose economy is weak are likely to be negatively impacted with the emergence of globalization. This means it could be affected by financial shocks from countries with an improved economy. Secondly, financial globalization makes countries to liberalized their system and integrate it to international financial market (Stulz, 2005). In case, there is an imperfection in the international financial market; this would lead to herding behavior, bubbles, and a speculative attack on the exchange rate. Thirdly,

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