The globalization of international finance
Description:
Finance, which is also called the virtual economy, is related to the real economy. The real economy means economy activities which are production of materials, sales, and labors to serve them. It includes agriculture, industry, transportation, business, construction, and so on. While virtual economy means the movement of virtual capital such as stock, bonds and so on. With the development of technology and globalization of economy, the finance shows a trend of globalization.
Enablers:
- The globalization of real economy
The underlying reason for the globalization of finance is the globalization of the real economy. As we can see that the real economy is the base of virtual economy used to serve the former one. To fit with the globalization of real economy, the international finance also becomes globally. To be specific, three economy factors influence the international finance.
*The persistent growth of international trade. Since 2002, international trade began to rejuvenate which can be illustrated by the evidence that growth rate of international trade is one percent higher than that of international economy. The growth of international trade drives more and more countries to participate in the global market which laid a firm economy basis for globalization of finance.
Inhibitors:
- The fear of too specialized and unfairness of the local governments may lead them to legislate laws preventing international trade.
- High tariffs, quotas, and other public policy interventions.
Paradigms:
- The World Trade Organization (WTO) operates with the broad goal of reducing or abolishing international trade barriers, which can largely increase the international trade.