Throughout the early 1980s and 1990s, the extent of global financial market integration grew exponentially. The growing globalisation of investment to maximise returns and diversify risks globally has been one of the main reasons behind the trend. Around the same time, diverse economies have facilitated capital transfers by removing capital outflow constraints and monitoring, liberalising national financial markets, opening up overseas investment constraints, and developing their economies and opportunities by market-oriented restructuring (Akyüz, 2017). Emerging economies across the globe evacuated confinements on international financial exchange and around the same time those economies tranquil the operations of domestic financial markets as well to go beyond systems of financial subjugations.

The growth in foreign financial convergence has been matched by a substantial increase in secluded capital investments to developed countries. In the 1980s, direct overseas investment in developing countries began to grow and disseminated to an astonishing rate after 1990, while portfolio flows consisting of asset classes, shares, and payment certificates grew until the mid-1990s. In recent years, international investment has been rising the occurrence of financial instability and monetary crisis ( Lane et al., 2017). Meanwhile, collateralised bank deposits declined considerably in comparison to total rises and falls.

Economic transparency is often perceived as a significant potential benefit for a developing country. Access to international financial markets improves investment long term growth prospects for creditors and offers the ability to achieve higher risk-based returns on investment. There are some significant advantages from the perspective of the receiving nation too. Accessing the world's financial markets has been believed to encourage governments to take on loans in the wake of undesirable disruptions and to compensate for significant and lasting future development and welfare benefits arising from this unknown risk exchange. At around the same time, It is also prominent that a highly open capital account may also entail substantial costs to a developing country, such as the possibility of uncertainty and sudden revs in capital flows.

Rewards & Shortcomings of Global Monetary Integration

International financial integration holds numerous benefits for developing countries. Global financial integration allows a country to enjoy liberty in an economic context. Whenever a developing country faces financial crises, it can ask other economies for help. In other words, if a country faces difficulties in the domestic financial market, it may need to borrow from other countries that are financially stronger than the specific country. International financial integration allows countries to borrow from other reliable and developed countries. Consequently, it becomes smooth and convenient for developing countries to tackle the adverse economic conditions. The land that borrows finances from other countries can invest the borrowed capital in domestic financial markets to regain the momentum (Mendoza, Quadrini and Ríos-Rull, 2009).

On the other hand, a developing country can also lend investments and capitals to other needy countries in its prosperous financial circumstances. Domestic financial regain may enable a developing country to be thriving in its Economy. The prosperity will then allow the country to lend money and finance to other needy or under-developed countries. Accordingly, the country that gives something to other countries will have the opportunity to earn returns on the capital that is invested in the foreign financial market. Thus international economic integration can pose numerous benefits for the countries in both of the mentioned financial circumstances.

International financial integration may also influence the internal economic development of a specific nation. The opportunity to invest is limited by truncated income in many developing in under-developed countries (Kose et al., 2009). Where the gross return on investment is at least equivalent to lent money, net external resource flows will add up to national spending, raise physical wealth per employee and help the beneficiary country boost its economic growth rate and advance living standards. These impending benefits can be especially bulky for some forms of capital inflows, specifically foreign direct investment.

Foreign direct investment may encourage the transmission and delivery of knowledge and information. The international financial integration allows the nations to exchange skilled labour and trained staff—consequently, the skills and information travel from country to country in the form of human capital. People learn by practically working with skilled and advanced labour, the awareness towards technology improves, and job training enhances the knowledge and information of labour (Schmidt, 2015). Numerous developing countries can exploit the exchange that international financial integration offers. Developing countries can utilise the workforce that is skilled and trained by developed countries in domestic financial markets to earn potential reimbursements of international financial integration.

Although there are some chances of augmented competition that may have some undesirable impacts on local markets as well, however, increased competition may also pose certain benefits for internal or domestic Economy as well. Increased competition in the domestic market caused by internationalisation can increase the amount of variations of capital goods available to manufacturers. On the other hand, international financial integration may reduce the rates of raw material that may impact the cost of production for local manufacturers as well. Consequently, domestic or internal marker also grows and develops with the growth of international businesses in a country (Klaus Schwab, 2016).

Further, the unrestricted movement of wealth across borders could lead economies to more conservative macroeconomic practices and hence reduce the normal incidence of errors by growing the benefits of sound policy and punishments for poor policies. Accordingly, more excellent continuity in policy results in superior macroeconomic stability, it may also prime to higher financial growth rates. A similar statement is that international financial liberalisation may be an indication for the country's desire for following a sound fiscal policy, for instance, by reducing budgetary deficits and not using inflation levy. Accordingly, international financial integration supports the financial stability of a country. Global financial integration ensures the effective and efficient allocation of resources that will eventually enhance the monetary growth rate for a specific country or region.

A fundamental barney in favour of international financial integration is that it can substantially enhance the productivity of domestic or internal economic markets. Global financial integration reduces the prices and undue benefit from monopoly or captivated markets, to expand the size and scope of national financial markets and to improve the productivity of the financial intermediation process (Georgiadis, 2016). Increased productivity in effect will result in lower banking mark-up rates, lower acquisition costs, and a higher rate of growth.

Increasing the level of bank competitiveness and allowing the introduction of more dynamic financial strategies and innovations, including integrated risk management framework, which can improve performance, minimising the expense of collecting and storing information about prospective lenders, Global financial integration increases the consistency and affordability of monetary services in the domestic market.

International financial integrations may also produce significant disadvantages in addition to the possible benefits. The risk involves a high absorption of capital flows and the absence of permanent or required access to finance for small republics. Insufficient local allocation of these flows can hinder their development impact and intensify pre-existing internal misrepresentations, lack of macroeconomic constancy, pro-cyclical movement of short-term capital flows, and high rates of capital flows. All these factors can contribute to severe financial circumstances of domestic, commercial organisations (Banks-Leite et al., 2014).

The primary disadvantage of international financial integration is the concentration of economies that benefited from foreign direct investment. Only a few nations exploited the welfares of global financial integration. There are numerous poor and needy countries in the world that are not even able to partake in international businesses. Consequently, those nations that do not participate in international financial integration are deprived of the potential benefits of integration. Accordingly, wealth revolves around certain or specific countries that are small in numbers. Consequently, a large number of deserving developing countries rationed out of international financial markets.

Secondly, it is not apparent that foreign investments can improve and enhance the financial growth of specific countries. The mismanagement of capital inflows may be attributed in part to anomalies in the local Economy that already exist. The moral hazard issues associated with deposits insurance can be compounded by the overt or indirect intermediation of the banking industry, in countries with weak banks. For example, banks that have a negative valuation of equity and a lower ratio of capital to risk-adjusted assets, and inadequate regulation of the financial sector (Kalemli-Ozcan, Papaioannou and Peydró, 2013). In other terms, borrowers may indulge in more aggressive and focused lending operations.

Conclusion of Global Monetary Integration

International financial integration is of significant importance for developing countries. The global economic integration provides numerous opportunities to developing countries to improve their financial growth rates. International financial inclusion possesses multiple benefits and advantages for developing countries as it allows for a platform to borrow in difficult economic circumstances. Additionally, developing countries can improve domestic businesses by foreign capital and may earn large profits for the future. Competition in local markets increases with international financial integration that may also have positive impacts on the Economy of a specific country.

On the other hand, international financial integration may also pose certain disadvantages for developing nations as well. Historically, the global financial inclusion only assisted a few developing countries that deprived of poor and developing countries of its benefits. Furthermore, international financial integration may increase the threats for economies despite benefiting them by increased interest rates against foreign capitals.

Task 2
GFC (Global Financial Crisis)
Introduction of GFC (Global Financial Crisis)

During a financial crisis, the value of possessions is falling rapidly, corporations and customers cannot pay their loans, and financial services companies have a liquidity deficit. A recession is also related to a turmoil in which shareholder sell investments or remove funds from savings accounts since they are afraid that if they stay in a financial institution, the worth of those investments will deteriorate. Additional circumstances can include a debt crisis, a national default or a fiscal crisis. An economic crisis may be confined to banks or distributed through a single country, a region's Economy or world economies. There may be several reasons for the financial crisis. Usually, there will be a problem where organisations or properties are overvalued and excessive, or activist investor actions will worsen them (Degl’Innocenti et al., 2018). For example, a fast variety of releases can decrease asset prices, cause people to dump assets or make significant savings withdrawals when the news is made about bank failure.

After the stock market crash of 1929, the 2007 global financial crisis was the worst economic catastrophe. The recession erupted in 2007 with a subprime mortgage debt default, and in September 2008 the Lehman Brothers corporation collapsed, resulting in a worldwide financial downturn. Enormous relief efforts as well as other initiatives to minimise the impact of the devastation collapsed and the world economic crisis began. The Global Financial Crash, the new and most devastating global crisis, will be given extra consideration as its triggers, consequences, reactions and lessons relate directly to the current financial environment (Lehkonen, 2015).

Grounds and effects of the International Economic Crisis

There was much misery on the mortgage market in the United States, and many borrowers who took on sub-prime mortgages find that they could not repay themselves. During the decline of the valuation of houses, many lenders had negative stocks. Despite a substantial percentage of lenders defaulting on loans, banks faced a condition in which the house and the property they had taken over were worthless on the market than they initially lent. The banks faced a liquidity crunch as it became more and more difficult to invest and receive residential loans as the bubble exploded. While housing crash in the U.S. is often pointed to as a cause for the global financial crisis, some analysts, and in particular policymakers in the U.S. in recent years, assumed that perhaps the financial system deserved tighter supervision to deter avaricious financing (Bekaert et al., 2014).

On September 15, 2008, Lehman Brothers, the most significant investment bank with subprime mortgage-backed securities, declared bankruptcies. At the time of its demise, it became the fourth leading bank in the United States to create a fiscal issue in the United States, Europe and Asia. Governments all over the world have failed to save major financial institutions, as the effect of the mortgage and bond crisis has intensified. Multiple financial firms have faced severe liquidity issues. The government of Australia has unveiled its first stimulus package to improve the stagnant Economy.

Meanwhile, investment banks have developed mortgage-backed securities (CDOs) for the secondary market mortgages in pursuit of easy gains as a result of the dotcom crash and the recession in 2001. Since sub-prime loans were combined with prime mortgages, the threats associated with the product could not be understood by borrowers (CGFS, 2018). The housing bubble, which had been building for many years, had eventually burst as the demand for CDOs started to heat up. With house prices dropping, sub-prime homeowners began defaulting on credit worth more than their homes and intensified the market downturn.

The ability to become wealthy from an economic point of view is not evil. Yet as it gets to the point, greed is evil. The same thing happened during the pre-crisis era. Homeowners wanted to flip real estate to get wealthy quickly. The originators of the mortgage have been doing a great deal to increase loan amounts. To secure subprime mortgages bankers were paying ridiculous amounts of money. Rating companies have been listed as investment classes of benefit by classifying potentially harmful securities. Regulators concentrated on rising private sector paychecks. And politicians sought to make themselves famous, pressuring banks to lend money to their dealers. Bankers and policymakers have developed an uneasy relationship since the 1980s. With the sanction of bank fusions according to the legislation on the reinvestment of the Economy, policymakers practically squeezed banks to lend to non-creditable borrowers. As banks and institutional investors take up chances, politicians played a part in the growth of America's affordable housing vision.

Although national governments avoided the failure of major financial institutions by restructuring banks, the stock market worldwide remained deteriorating. The home economy has also struggled in other areas, contributing to evictions, forcible unemployment and long-term work loss. The turmoil has had a significant role in the collapse of leading companies, an unprecedented trillion dollars reduction in household income, and a global slowdown that leads to the Great Depression and contributes in the European sovereign debt crisis (Rughoo and Sarantis, 2014). The initial phase of the market collapse was when BNP Paribas cancelled contributions from three investments which resulted in massive liquidity precipitation.

The emergence of the U.S. housing effervesce, which peaked in late 2006, instigated stock rates knotted to U.S. real estate markets to collapse, creating global harm to financial institutions. A dynamic interplay of policies which have improved ownership, promote preparation for loans to sub-prime lenders, tend to increase the overvaluation of sub-prime mortgages, dubious investor and selling activities, compensation mechanisms that offer preference to the flow of short term transactions based on long-term value creation, and a financial crisis. The global economic crises had negative impacts on businesses across the globe. Currencies across the globe were devalued, the investors from across the world hesitated to invest in household and other projects as well.

Economies throughout the world became sluggish at that time as the global investments were slow during that period. Additionally, Financial companies were then closer together as policymakers have eliminated obstacles to capital flowing across the world. As banks found that their liabilities were short of money, problems spread to other institutions very quickly. These factors were called a liquidity crisis, as the banks needed cash to fulfil their immediate needs-known as liquid capital (Ip, 2012). This was an immense concern because every business depends on financing it takes down the whole of the Economy as the banking sector contracts. Crises in many sectors, for example, automotive production are challenging, but they do not impact the stability of the economic system.

The global financial crises influenced numerous countries across the globe. During the era of the global financial recession, thousands of businesses around the world shut down, and millions of people lost their jobs as well during the global financial crisis. The fall of the gross domestic product of the United Kingdom fell significantly. The fall in the United Kingdom was more significant than any other country in the world. The nations around the globe felt the after-shocks of the global financial crisis for longer than the expected period. House prices not only fell in the United States of America, but real estate businesses were devalued across the globe (Dias, Rodrigues and Craig, 2016).

Additionally, the national income of almost all countries across the world decreased significantly as well. On the other hand, the rate of unemployment raised in numerous countries as a consequence of the global financial crisis. Along with increased unemployment, wages have also fallen in real estate as well as in other business sectors. Furthermore, the global financial crisis made economic circumstances further complicated for developing and under-developed countries. The fluctuations in currency rates made the debts increased for developing countries. Consequently, the countries that were already struggling for paying the debts were negatively wedged by the global financial crisis.

The crisis that influenced the financial sectors restricted the banking and financial operations of banks across the world. Lending for small business sectors became more complex than ever before. Accordingly, the worldwide economic crisis of 2007 and 2008 did not have adverse impacts on particular countries, but it also negatively affected the businesses from all over the world (Iannuzzi and Berardi, 2010).

Conclusion of GFC (Global Financial Crisis)

The global financial crisis implies a period from 2006 to 2008 in which global financial markets went in recession. During the global financial crisis, the housing and financial institutes across the world struggled to operate. Numerous factors caused the global financial crisis. The primary reasons that caused the global financial crisis include the devaluation of housing in America that influenced the banking sector of the country. The banking sector operates in an international context, and the financial sector is deeply associated with the universal financial industry.

The collapse of the banking system in the United States of America negatively influenced financial institutions across the globe. During the global financial crisis, it was not just the United States of America that struggled, but the crisis collapsed the businesses across the world. Economists and policymakers from all over the world still need to learn from history to prepare the world against such possible future financial disasters (Klaus Schwab, 2016).

References of GFC (Global Financial Crisis)

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