Summery of Globalization, Politics, and Financial Turmoil economic Essay

Summery of Globalization, Politics, and Financial Turmoil economic - Essay Exampleexperience such crises principally because there is a breakdown in communication between the chief executive of the monetary means and financial officers in such times, leading to insufficient banking regulations and eventually flight of capital out of the country, which and then has a snowballing effect. For the purpose, Satyanath elaborates on three bodies of literature 1) globalization of capital and the political scenario in which there argon possibilities of miscommunication 2) the presence of ill-informed chief executive and 3) the existence of veto players, that is, those whose consent is necessary for any policy change. anterior to the 1980s, all developing countries had relatively stringent regulations on capital inflows and outflows. All foreign exchange legal proceeding were strictly monitored and banks had limits on overseas borrowings. From the 1980s, the International Monetary Fund (I MF) began to put pressures on the developing countries to liberalise the financial sectors, justifying that the access to foreign capital would deliver these countries to frame more than the domestic savings allowed them to. Besides, short-term cyclical recessions could be balanced with countercyclical capital inflows from overseas. Also, free mobility of capital would also allow domestic investors to invest abroad thus neutralizing domestic shocks while also allowing them to earn higher risk-adjusted returns. Lastly, the dismantling of the bureaucratic shackles would allow the financial sectors of the developing countries become more professional, the IMF argued. Consequently, many Asian countries liberalized the capital accounts as they did the trade accounts in the 1980s and 1990s, and the result was higher growth rates in Gross Domestic Product in the immediately succeeding years. However, by 1996, many of these same economies began to show signs of slower growth. Simultaneous ly, what disturbed the analysts were the growing real account deficits and increase in foreign