Internationalization of Financial Markets Essay - 1

Internationalization of Financial Markets - Essay Example People adopt all these strategies to reduce the risk and allocate the resources in a strategic manner. Â  During the last 20 years, internationalization of financial markets has developed at a very swift pace. This took place due to the amalgamation of goods market leading to the presence of multinational corporations. Imports and exports volumes have increased largely leading to increasing in international transactions. All these elements have increased their presence internationally but the growth of internationalization of financial markets has gone beyond the adjustment of trade. Along with this growth, banks’ existence has also increased internationally with many new branches in new countries to satisfy the needs of customers working for multinational organizations (Horne, 1990). Â  The reason that banks have different packages for different countries is that people have different needs and trends. Some countries might have the trend of saving more and some might have investment trend depending on the current situation of the country. If there is inflation in the country, demand is high but supply is very low because the purchasing power of consumers has increased but output has not increased at the same pace. The government will increase the interest rate so that instead of spending the money people save the money and do not demand much (Welch & Liostarinen, 1993). During this period, foreigners will start saving their money in those countries’ banks. Similarly, when there is deflation in any country government will decrease the rate of interest so that people invest more to stimulate the production and prices. Â  Moreover, different countries confront different kind of natural calamities and other destructions. Insurance companies have great significance in these kinds of countries, they collect premium from people periodically and invest this money in different projects.