LIBERALIZATION

Financial Liberalization

Financial Liberalization

Introduction

Financial Liberalization is define as “the elimination of restrictions on the activities of banks and other financial institutions which are providing financial services, such as providing loans, deposits, etc”. This allows financial institutions to decide to whom and to what criteria to allocate credits, allows himself to set the price (interest rate) on loans granted and interest on deposits taken, and to determine where (in addition to lending) that are available at their disposal (Andersen.et.al.2003).

Discussion

"The world of high finance can be understood only if one is aware that the greatest admiration goes to those who open the way to major disasters." (John Kenneth Galbraith)

We live in a time when profound changes are occurring in the field of economics, which currently has a global dimension. This is not a new phenomenon; the capitalist economic dynamics from the beginning has sought to conquer ever larger spaces, creating local markets first, then national, international and global now (Arestis.et.al,2002).

This process of economic globalization is being supported from a policy perspective, the neo-liberal thinking which seeks the gradual elimination of barriers to "free trade" of capital, goods and services, and attempts to form a legal ground to homogenized global promote "free market" anywhere in the world, forcing national governments to make legislative changes necessary to this end and leaving the state increasingly relegated to a role of guarantor of this new "order" global economic. Economic order aimed mostly by large transnational conglomerates (Kregel, 2004).

Financial Liberalization and growth are the two motto of economic policy speech of the highest Official international economic bodies such as the World Bank, IMF and OECD .The economic growth is the objective, the liberalization of the principal means to achieve this goal. This conception of economic regulation extends to financial markets, since 1960s, after decades of strict control enough government on financial transactions (after wars and crises of 20th century in particular).A new movement financial liberalization has been initiated, particularly in developed countries (Fase.et.al, 2003).

Liberalization of financial markets is advantageous to ease access to deeper and more liquid capital markets for business and investors, as well as for the reduction in the cost of capital. However, while liberalization of financial markets is beneficial for the financial community with regard to easing access to highly leveraged cheap loaming capital, experience has demonstrated that the benefits generated by a liberalized market can sometimes be asymmetric and inaccessible by all countries (Arestis.et.al, 2002).

If the deregulation movement in financing activities of the economy is criticized today by many activists and anti-globalization protesters on social or ethical grounds, may, without even enter into such considerations, to question its meaning. One can indeed wonder if financial liberalization is indeed the objective is usually assigned to it: the increase of the product average per capita. And if not, what other links between financial liberalization and the evolution of productive activity (Demetriades.et.al, 1996).

If the financial liberalization process at work for several decades is to support a number of theoretical justifications (associated supposed efficiency of ...