According to Mishkin (2007), globalization is the opening of domestic markets to foreign goods and direct investment, as well as to foreign capital and foreign financial institutions. Relating to the nowadays context of the global financial crisis we will focus on the investigation of financial globalization, which is the concept referring to rising global linkages through cross-border financial flows (Prasad et al, 2003). A closely related concept that of financial integration which remarks an individual country’s linkages to international capital markets (Prasad et al, 2003). It is natural to expect that increasing financial globalization is at the same time rising financial integration. Consequently, these two concepts will be used interchangeably in this paper.
It is soundly proved that developed financial systems have a positive effect on economic growth (e.g. King and Levine, 1993; Levine, Loayza, and Beck, 2000; Honohan, 2004). It is also argued that globalization stimulates the development of financial sector and, in turn, spurs the advancement of economies. Yet, the topic of globalization and especially financial globalization has always been and still is highly controversial. This controversy could be explained by the benefits and problems it brings.
The 1990s has been a period of an increasing number of financial crises. Moreover these events spread rapidly across the globe, leading to serious concerns regarding the stability of financial markets. For example, the impact of the Mexican peso collapse of 1994 (tequila crisis) was felt in a number of other Latin American countries. The Thai crisis of 1997 (Asian flu) initially impacted the Asian Tigers, and then propagated to other developing regions of the world as far as Latin America. The Russian default in the summer of 1998 (Russian virus) and the subsequent fall of LTCM, resulted in the collapse of numerous financial intermediaries throughout the world.
In response to the concerns recently raised by governments and consumer advocacy groups about the level of household debt in Australia, resulting in consumers becoming over-committed, Visa International, with support from the four major Australian banks, commissioned KPMG Consulting and its global research arm the Nolan Norton Institute, to research credit card use in Australia.
The aim of the project is to gather information on the use of credit cards, so that policy makers and the community can make informed assessments about the social and economic impact of credit in Australia.
