Has financial globalization failed to meet expectations Discuss Essay

Has financial globalization failed to meet expectations Discuss - Essay Example However, despite positive predictions of neoclassical models, there is empirical evidence, which calls into question the positive impact of financial globalization (Stulz 2005). The aim of this paper is to define the expectations associated with financial globalization and to explore whether financial globalization has failed to meet these expectations. Global cross-border liberalization of trade (the second age) in financial assets also knows as financial globalization has become possible after the WWII, when the countries have removed their barriers (Stulz, 2005; Mishkin, 2009). According to the neoclassical theorists, such a shift to financial liberalization should have been beneficial to both developed and developing economies (Stulz, 2005). The benefits associated with global liberalization were expected to be especially large and significant for developing countries (Kose, 2009). Great examples could be listed here are two the most populous countries in the world, which have managed to reduce the percentage of extremely poor people and, thus, to reduce income inequality in developing markets (Mishkin, 2009). Furthermore, financial integration is viewed as an important step for middle income emerging markets enabling to enhance macroeconomic stability in developing countries (Kose et al., 2009:9). In result of financial integr ation, capital-poor (developing) countries are expected to expand their narrow production bases (often dependent of natural resources or agricultural sector) leading to enhanced specialization and, thus, to decrease macroeconomic volatility (Kose et al., 2009). Moreover, liberalizations of equity market are recognized to be a strong driver of both short-term and medium-term growth (Kose et al., 2009). Mishkin (2006) in his book â€Å"The Next Great Globalization† also explains the benefits of financial globalization, arguing that financial globalization can bring huge benefits if there will be undertaken the