The Globalization of Finance and its Implications for Financial Stability: An Overview of the Issues

Abstract

This paper provides a general overview of the impact of financial globalization on financial stability with a view to identifying sources of strength and potential vulnerabilities. Attention is focused on the benefits and risks for financial stability associated with changes in financial markets; the globalization of the banking system; and the role played by other important players in the global financial system such as pension funds, mutual funds, insurance companies, and hedge funds. The paper also examines risks to financial stability arising from current regulatory regimes.

Keywords: Financial globalization, financial stability, banks, pension funds, insurance, mutual funds, regulation

JEL Classification: F3, G2