Financial systems

Question 1

Overview

Answer 1

World has became increasingly financially integrated due to financial deregulation

Question 2

Financial deregulation

Answer 2

Made it easier to move finance across borders making it easier to trade with and invest in other countries

Question 3

GFS

Answer 3

Global financial system provides framework that facilitates flows of capital for the purposes of financing investment and trade

Is used by financial institutions, TNC’s, consumers and investors, monitored by IMF

Integration of developing economies into GFS has helped reshape international trade

Question 4

Disadvantage

Answer 4

Free movement of capital and deregulation leaves the system exposed to volatile capital flows, triggered global banking crisis 2008-9

Question 5

Global financial system

Answer 5

The ​global financial system​ ​accelerates globalisation as it makes the world more ​connected​:
● Banks are now large global institutions that work with ​millions of people’s money​.
● Multinational corporations ​invest their profits for more ​interest​, meaning ​billions of
dollars​ ​are put in the system
● People buy and sell ​shares ​and stocks from global corporations. These purchases are
done all over the world, and people from any nation can buy them.
● Entire countries invest and take loans from huge financial institutions such as The World
Bank, which is a huge global flow of capital.
● Countries also borrow, lend, and invest in other countries, which develops the
relationships​ ​between the countries.

Question 6

Financial technologies

Answer 6

Financial technologies
Financial technology has made financial information and money ​easily accessible ​for people across the world, deepening the connections between countries:

● Informed decisions about investments, buying and selling, and other financial information is all available due to global ​communication technology​, e.g. stock market trends are easily accessible
● The ability to connect with international banks have allowed people to have ​offshore bank accounts​, creating more personal wealth
● Global banks can operate due to their ability to ​communicate ​with their national and regional branches
● Companies can operate even when they are relocated to other (usually low income) countries as money can be transferred to a country (for building factories, buying materials etc.) and profits can be sent back to the company headquarters.
● Specifically, the ability to ​transfer money ​thanks to the ​internet ​has revolutionised global finance, allowing the world to be connected:
○ People can ​buy and sell things globally ​without having to meet the buyer to pay
○ Remittances ​(money sent back to home country) can be sent home with speed and
ease
○ Cryptocurrency (encrypted digital currency) has been developed, which has
created a whole new market for online currency and trading