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Does globalisation of world fianancial markets make international deversification of portfolios more or less desirable - Essay Example

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Masters
Essay
Miscellaneous
Pages 8 (2008 words)

Summary

There were many discussions regarding the benefits and detrimental consequences f financial liberalizations, however the issue is still subject to continuous debates and no ultimate solution have been reached at. The main issue f the debate is that there are significant positive effects f international capital surges into developing economies, but negative consequences can quickly overshadow these benefits if short-term inflows are allowed to reach unsustainable levels…

Extract of sample
Does globalisation of world fianancial markets make international deversification of portfolios more or less desirable

Portfolio investment encompasses trade in securities like stocks, bonds, bank loans, derivatives, and various forms f credit (commercial, financial, guarantees). Direct investment involves the purchase f real estate, production facilities, or substantial equity investment. To answer the question whether financial liberalization is good or bad we need to analyze arguments given by both opponents and proponents f financial liberalization. First we will consider arguments against financial liberalization followed by arguments supporting the view f financial liberalization.
Research finding proving the detrimental effect f liberalization on the financial system. The Wyplosz research paper says that the evidence based on studies f the experience with liberalization in a sample f 27 developing and developed economies seems to be converging to the view that liberalization contributes to both banking and currency crisis.
A study by Eichengreen, Andrew Rose and Wyplosz (1995) found that the presence f capital controls reduces the possibility f a currency crisis. ...
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