International Financial Markets

International financial markets are a major source of funds for international transactions. Most countries have recently internationalized their financial markets to attract foreign business.Recent financial globalization is being driven by advances in data processing and telecommunications, liberalization of restrictions on cross-border capital flows, deregulation of domestic capital markets, and greater competition among these markets for a share of the world’s trading volume. This globalization involves both a harmonization of rules and a reduction of barriers that will allow for the free flow of capital and permit all firms to compete in all markets. In other words, financial market imperfections declined because of this global integration of money and capital markets. Yet, there are still excellent opportunities for companies to lower their cost of capital and for investors to increase their return through international financial markets. This chapter examines the three financial markets — Eurocurrency, international bond, and international equity — that allow companies to serve customers around the world. In addition, this chapter also discusses developing countries’ debt problems and financial crises of industrialized countries.