Financial Globalizations Crisis and Its Effect on Indian Financial Markets

Financial Globalization is the integration of a country’s local financial system with international financial markets and institutions. This integration typically requires that governments liberalize the domestic financial sector and the capital account. Financial globalization is not a new phenomenon, but today’s depth and breath are unprecedented. Capital flows have existed for a long time. In fact, according to some measures, the extent of capital mobility and capital flows a hundred years ago is comparable to todays as opined by Bordo, Eichengreen and Irwin5. At that time, however, only few countries and sectors participated in financial globalization and capital flows tended to follow migration and were generally directed towards supporting trade flows. It was not until the 1970s that the world witnessed the beginning of a new wave of financial integration. Decreasing capital controls and increasing capital mobility with a growing participation of a wide range of developing counties in the global financial system characterized the post- Bretton Woods era, leading to a more integrated world economy towards the 1990s.