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Interdependence of World Financial Markets and Foreign Exchange Fluctuations

In: Business and Management

Submitted By zaharinali
Words 4027
Pages 17
Othman Yeop Abdullah Graduate School of Business Graduate

Universiti Utara Malaysia

BDFM 7053 GLOBAL ECONOMIC THEORY AND ISSUES UUM-Rezzen KL Third Semester May Session 2013/2014 Prof Dr. K. Kuperan Viswanathan SHORT PAPER #1

INTERDEPENDENCE OF WORLD FINANCIAL MARKETS AND FOREIGN EXCHANGE FLUCTUATIONS

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ZAHARIN BIN ALI MATRIC No. 95906
June 14, 2014

Short Paper #1

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1. INTRODUCTION With the increase in advancements in transportation and communications made possible by technology, the world has seen exponential growths in economic ties among all nations. In the last few decades, globalization has resulted in a rapid surge in the interchanging of goods and services reaching across further and faster beyond national borders, whilst increasing the interconnectedness of different markets and cultures. These economic ties come in the forms of international trade, foreign direct investment and monetary integration, made possible with the complementary increase in the interdependence of international financial markets. With further liberalization and deregulation, financial market interdependence grew in momentum alongside the worldwide capital mobilization. This growing interconnectedness of all the world financial markets and the degree of their interdependence have themselves created a subject of substantial interest among economists. The recent global financial crisis has only elevated this interest further, as the impact of U.S. subprime crises on the world economies have provided evidence of global financial markets interdependence. Many international stock markets, for example, experienced their worst abrupt declines in their history with drops of around 10%, triggered moments after the collapse of Lehman Brothers hit the U.S. financial markets. Even the Bursa Malaysia KLCI was not spared, dropping to its lowest point in...

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