Global Financial systems Flashcards
(18 cards)
What is a financial system?
the network of institutions, markets, regulations and technologies that facilitate the flow of money and capital globally
What are some examples of financial systems?
Banks, investment firms, stock markets, insurance companies, supranational organisations (IMF, WB)
What are examples of flows of capital?
FDI, Remittances, loans, stock, bonds
Who dominates capital supply?
HICs. LICs are often recipients
What happened to financial systems since 1980?
deregulation allowed free movement of capital. helping create a truly global financial market
Who are the financial centres?
New York, London, Hong Kong, and Tokyo are global hubs.
Emerging centres are Singapore, Dubai and Shanghai
What does the IMF do?
Provide short term loans.
Promotes financial stability.
What does the world bank do?
Provides long term loands and grants for development projects.
Focuses on poverty reduction, infrastructure and education
What does the Bank for International Settlements (BIS) do?
Coordinates central bank cooperation globally
What does the Financial Stability Board (FSB) do?
Promotes reforms to improve financial regulation and prevent crises
What happened in 2008 for finance?
Global financial crisis. Financial crash
What caused the global financial crisis 2008?
Sparked by subprime mortgage lending in the US.
Risky loans sold globally.
Banks collapsed
Triggered worldwide recession
What were the impacts of the 2008 financial crash?
Global GDP fell –> millions lost jobs.
Bank bailouts costs trillions.
LICs suffered indirectly –> less aid, trade and remittance
What were the governance responses to the 2008 financial crisis?
Creation of G20 summits.
Reforms by IMF and WB to prevent future crisis.
Stronger regulations
What are the strengths of the global financial system?
Mobilises vast capital for development.
Enables global investment and growth.
Promoted innovation and trade.
Offers funding for emergencies IMF
What are the weaknesses of the global financial system?
Highly unequal.
Vulnerable to crises.
Often poorly regulated.
IMF and WB criticised for lack of democracy
How are financial systems related to inequality and power relations?
Core-periphery dynamics: HICs dominate financial decisions.
IMF voting power weighted by financial contribution (USA 16%).
LICs must follow strict loan conditions, reducing sovereignty
What are the emerging trends related to global financial systems?
Rise of BRICS: e.g. China and India creating alternative systems. e.g. New development bank.
Cryptocurrencies.
Green finance
