(Solution Download) 1 Explain the advantages and disadvantages of the globalization

1. Explain the advantages and disadvantages of the globalization of finance. How did it contribute to the global financial crisis?
2. Describe how the fall of AIG exemplifies contagion. How did the U.S. government bailout of AIG benefit foreign as well as U.S. firms and investors? Experts are advocating increased regulation to prevent contagion. At the national and international levels, what types of regulation might prevent future crises?
3. Several European countries have adopted a single currency, the euro. Describe how adopting the euro might benefit countries in Eastern Europe. What are the advantages and disadvantages of a single currency regime in international financial transactions?
4. As the world emerges from the global financial crisis, what is the potential role of each of the following: firms, banks, central banks, national governments, the International Monetary Fund, and the World Bank? What is the role of national governments in stimulating national economic growth?

Growing integration of financial and monetary sectors of the world?s economies is yet another facet of globalization. Globalization of finance is typified by massive cross national flows of money and capital and the development of a giant foreign exchange market. Every day around the world, firms access global capital markets. Banks and brokers move huge sums across national borders via pensions, mutual funds, life insurance, and other investments. In short, national financial markets are increasingly interdependent. Among numerous benefits, financial globalization increases savings and reduces capital costs in developing economies.


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