Coursework Assignment Example | Topics and Well Written Essays - 2000 words

Coursework - Assignment Example Financial crises may spread through financial globalization such as the recent global recession caused by the 2007 subprime crisis in the US and 2008 banking crisis in Europe. This paper evaluates whether the process financial globalization has been significantly weakened by the recent global financial crisis that led to the collapse of world trade in a pace that has not been witnessed since the Great Depression in the 1930s. It also investigates if this constitutes a problem for the international financial system and the countries within it. The paper presents some practical suggestions for national and international financial regulators in the light of what has happened to financial globalization over the last five years (Ceballos, Didier and Schmukler, 2012). The process of financial globalization in terms of Foreign Direct Investment, foreign bonds and overseas lending maintained a steady growth since early 1980s from a low of 0.5 trillion USD to a high of 1.8 trillion USD by 2007. However, this trend changed with the occurrence of the recent financial meltdown. With the high global financial linkage, the financial crisis was felt in many economies globally. The foreign capitals flows declined by 60% (Lund & Dobbs, 2013). Economies became more wary of their global financial assets after the global recession. The annual growth in equity market capitalization and purchase of foreign business and government bonds declined by 6% to 1.9% and has been the case in both developed and developing economies globally. Cross-border lending began to decline from a high of 5.6 trillion USD in 2007 to a low of 1.7 trillion USD in 2012. This decline is associated with the selectiveness of banks and narrowing the scope of global operations by banks as a result of fresh investment and regulatory requirements to caution domestic markets against financial risks. Most of the international commercial banks have disposed assets and