Contents

• This assignment is based on the following assignment description –
• There are several ways of calculating the degree of financial integration between countries (another term often used is ‘capital mobility’). Two notable ones are:
• 1. Savings/Investment correlations, and
• 2. Interest Rate Parity
• Your task is to write a paper evaluating the extent of financial integration, using the above measures, for any country or countries, and for any time period.
• This is a research project. I expect it to take the appearance of an academic paper and be structured as follows:
• - Introduction
• - Theory/Model.
• Find the theories or models that are relevant for the research question above. Describe the salient characteristics of these theories or models and what the models conclude.
• - Empirical evidence
• Find some evidence that supports (or refutes) your conclusions in the above section. You may do this in two ways – either find some literature that points to the empirical evidence of this theory/model and/or collect your own data and present your evidence. As stated above, this can be done for any country or time period of your choosing.
• - Conclusions
• - References

Description

The debate of globalization and its effects has taken centre stage for quite some time now. However, the effects of the phenomenon are still being felt and the phenomenon itself is still being understood. The nature of the debate has changed from whether it is good or not to how the ill effects can be tackled since it has been recognized as a phenomenon that cannot be restricted. It has shaped all the economies of the world, no matter how open or restrictive they might be. The local economy of a nation is no longer influenced only the nature of its industries but is equally affected by the produce of other nations in the world. There has been a general move towards liberalizing economies due to lessons that indicate how restricting the economy of a nation can no longer shield it from the effects of the global economy. However, it has also been realized that the process of liberalizing the economy must be cautious and slow in order to negate effects such as economic collapses and crises. Therefore, in the below section we shall examine the ways in which governments exercise control over the capital flow into and out of a country and look at an example of such a case (McKinnon, 1993).