Elgar original reference
Edited by Andrew W. Mullineux and Victor Murinde
Andrew W. Mullineux and Victor Murinde The ‘internationalization’ of banking, which started in the early 1970s, paved the way for the ‘globalization’ of ﬁnance and became more and more evident during the 1990s as international capital ﬂows increased in magnitude. The internationalization and globalization processes have been facilitated by the ongoing communications and information technology (C&IT) revolution and capital ﬂows have increasingly responded to economic and political news. This has created the potential for increased global ﬁnancial, and consequent economic, instability, of which the 1997/98 Asian ﬁnancial crisis might only be a precursor. By allowing countries, whether they are developed, developing, in transition or emerging market economies, to draw on a global capital pool to ﬁnance investment, rather than rely entirely on domestically generated savings, a globalized ﬁnancial system provides great opportunities as well as the aforementioned threat of instability. The ultimate objective of the monetary authorities must thus be to create a new ‘global ﬁnancial architecture’, which ensures that capital ﬂows freely to those who will make the best use of it to enhance the well-being of mankind. To achieve this, risks and beneﬁts (pecuniary and social) and disbeneﬁts (for example, poverty and environmental degradation) must be accurately priced and measured and a regulatory and supervisory system must be put in place to assure price stability without distorting the price mechanism. Much work needs to be done to achieve such a utopia, but good progress is being made on risk, environmental and poverty impact measurement and...