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IntroductionFinancial globalization refers to the incorporation of domestic financial scheme of a country with the global organizations together with financial markets. Enormous growth have be demonstrated in world economy over recent years, and in the area of technology, more specifically in communications and transport revolutions which has resulted to globalization of capital. Financial globalization enhances flow of capital across nations and organized global allocation of resources. The World Bank and the International Monetary Fund are the two major institutions established to endorse global trade to keep up with the increase of economic globalization. Main agents of financial globalizationGovernmentsAccording to Schmulker, ( 2004 p. 44), Governments permits financial globalization through liberalizing restraints on the local monetary sector and capital account of the balance of imbursements.

In past years, governments were regulating the domestic monetary sector through restraining the allotment of credit by controlling quantities and prices. They also inflicted several restraints on capital investments across countries. The instruments utilized in restricting capital account includes constraints on overseas exchange transactions, derivative transactions, borrowing and lending activities by corporations and banks, and involvement of foreign investors in the domestic financial scheme. At the end of Second World War, the United States which was the only developed industrial economy was pushed into an unparallel state of economic leadership.

From early times of the battle, British and US officials designed a collection of global institutions aimed at promoting economic recovery, free trade, economic stability and full employment. The general agreement on trade and tariffs, Bretton Woods institutions, UN relief and rehabilitation administration and Marshall plan were initiated by US to revive Europe and helped in laying of foundation for sustained and rapid expansion of global economy.

The private sector was the driving force of the post war boom. Major Service, manufacturing and extractive firms in North America and Europe had developed a significant global presence during the initial half of the century. After 1945, the impact of the transnational corporations in global economy increased as pioneers grew and was joined by Latin America, Asian and Japanese firms. Other complements were numerous government owned firms, largely in the service and energy sectors. Together and usually through collective ventures, the transnational enterprises intensified and extended industrialization and generated globalization of investment, trade and production that intensely increased global economic interdependence.

On the other hand, it increased the susceptibility economically weak nations via uneven disbursement of gains and strains on natural resources (Scholte, 2005 p. 34). Financial globalization poses new risks and new opportunities for policy makers. Economic liberalization has increased as more governments implement policies that enable them to closely integrate their economies into global economy, usually under extreme pressure from international institutions and bilateral donors. The new risks generated by globalization are compellingly demonstrated by global financial system (McGrew, 2008 p. 28). Liberalization and incorporation into the international capital markets has greatly expanded the vulnerability of nations to volatile flow of capital across national boundaries.

This was evident in the 1997 monetary crisis in Thailand, which sparked currency meltdown in East Asia, which catalyzed the collapse of Russian rouble in 1998. Having incorporated into the global economy, several governments are more susceptible to caprices of trade policies in developed countries, unstable capital markets and a volatile international financial scheme.

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