Financial globalization and peripheral integration: a reassessment

The global financial integration (GFI) has augmented the international financial flow movement without restructuring global financial regulatory system (GFRS). The goal of the global financial regulatory system is to maintain global level stability. In GFRS, the financial stability board (FSB) is responsible for the macro-prudential regulation and the micro-prudential regulation is monitored by international standard setting bodies (SSBs), international financial institutions (IMF and World Bank) and national financial regulators. These micro-prudential regulation and macro-prudential regulation are non-binding in the legal sense. However, these regulations examine as a standard of efficiency. The member nations are strictly implementing the standards because it provides stringent firewall during the unwanted financial turmoil. It also reflects the strength of the member nation. So, the evolution of micro-prudential regulation and macro-prudential regulation is a continuous process; it has to be evolved and developed as per the dynamic changes in the global financial system.

The objective of this chapter is to elucidate the evolution, spread and unfolding of global integration, in particular financial globalization, since the mid-nineteenth century. While the primary focus is financial globalization, this cannot be totally separated from economic globalization. This chapter provides a preamble to the debate and essentially delves into the principal characteristic features of financial integration and related global economic developments. Unquestionably, global economic integration, in particular financial globalization, made impressive strides during the pre-World War I period and it has been extensively covered in the globalization literature. However, economic and financial globalization in the contemporary period for the most part surpassed that in the preceding periods by a sizeable margin.KeywordsForeign Direct InvestmentMonetary PolicyInternational Monetary FundExchange Rate RegimeCapital ControlThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

One of the many definitions of financial globalization is integration of domestic financial system of a country with the global financial markets and institutions. Enabling framework of financial globalization essentially includes liberalization and deregulation of the domestic financial sector as well as liberalization of the capital account. As economies progressively integrate globally, pari passu the financial structures of markets and the world of finance change. Financial globalization cannot be considered a novel phenomenon. Trans-country capital movements are centuries old. The oil shock of 1973 and the collapse of the Bretton Woods system, both of these developments were momentous and were responsible for laying the foundation of the contemporary era of financial globalization. After the collapse of the Bretton Woods system, some middle-income developing economies began to liberalize and open up for greater capital mobility, while keeping an autonomous control over their monetary policy. Advances in IT and computer technology are cited as one of the most important factors driving and supporting financial globalization. Transnational corporations (TNCs) also helped in global financial integration. They expanded their networks by merging with or acquiring other national and international firms. The prime movers in financial globalization are governments, borrowers, investors, and financial institutions. Each one of these market participants propelled economies towards financial integration in a proactive manner. Financial globalization has caused dramatic changes in the structure of national and international capital markets. The most significant change in the capital markets was in the banking system, which went through a process of dis-intermediation. This was a market transformation of fundamental nature. Contagions and crises are the downsides of financial globalization. Economic and financial crises of the 1990s portend to the fact that financial globalization is not a win-win game, and that it can potentially lead to serious disorder and high cost in terms of bank failures, corporate bankruptcies, stock market turbulence, depletion of foreign exchange reserves, currency depreciation and increased fiscal burden. A unique characteristic of globalized financial markets is reversal of capital flows when market perception regarding the creditworthiness of the borrowing entity changes. Cross-country financial flows to the emerging market economies were low, at during the mid-1970s. They increased at a healthy clip during the decades of 1980s and 1990s, peaking in 1997. They suffered a sharp decline after that because of the Asian and Russian financial and economic crises. The composition of external capital underwent a dramatic transformation during this period. Official flows either stagnated or declined. As a result their relative significance in global capital flows dwindled. In their place, private capital flows became the major source of external finance for a good number of emerging market economies. FDI became an important and dependable source of finance for the emerging markets and other middle-income economies during the decade of the 1980s and 1990s. Portfolio investment in stocks and bond markets also increased substantially. Global institutional investors found this channel of investment functional and profitable. Mutual funds, insurance companies, and pension funds channeled large amounts through portfolio investment into the emerging market economies. As financial globalization progressed, presence of international financial intermediaries has expanded considerably. This applies more to international commercial banks than to investment banks, insurance companies and mutual funds. It is incorrect to say that their global expansion has been uniform because this has occurred unevenly. International bond issuance activity by emerging market economies recorded a sharp spurt in 1993. Emerging market economies began using ADRs and GDRs for raising capital from the global capital markets in 1990 in a small way.

Globalization has done little to fight global poverty and inequality. Though some critics have used this fact to argue against global economic integration, this article explains that those in favor of a freer and fairer global trade and finance system must link that regime with labor rights in order to achieve a reduction in global poverty and a more equitable distribution of trade gains. Without this connection, today's most powerful economies will be tomorrow's least relevant markets, finding themselves subordinate on the global supply chain to countries who were once thought of as “lesser developed.” This result will not come from increased development from those countries. Instead, it will derive from the erosion of progress in leading markets initiated by enhanced competition from countries with lower relative standards of living. Simply put: without a mechanism to increase those standards in the poorest countries, the richest countries will find their own standards retrograded in order to remain competitive. Accordingly, legal architectures must link free trade and global finance with core worker rights—or else.

Introduction: Understanding the heterogeneous impacts of environmental technologies (ETs), research and development (RD) spending and financial globalization (FG) on green economic growth (GEG) is worthwhile to promote progress toward GEG. Besides, exploring the moderating role of FG is essential to uncover the nuanced dynamics that shape the relationship between ET, RD, GEG, and the influence of global financial integration. Thus, this study examines the effects of ET, RD and FD on GEG in emerging market economies (EMEs). In addition, we investigate the moderating role of FG on the effects of ETs and RD on GEG.Methods: The method of moments quantile regression (MMQR) is applied using a fixed effects model that can capture distributional heterogeneity and nonnormality concerns for the panel of 25 EMEs from 2000 to 2019. In addition, other alternative models are applied to conduct robustness analysis. We use green total factor productivity (GP) to proxy for GEG using the Malmquist–Luenberger Productivity Index (MLPI) strategy based on the directional distance function (DDF).Results and discussion: The findings imply that ETs significantly impact GEG, revealing evidence that promoting environmental innovation positively contributes to GEG progress in EMEs. Likewise, RD promotes GEG progression in EMEs. Additionally, FG positively impacts GEG. FG also positively moderates the effects of ETs and RD on GEG, implying that countries open to FG can better harness the positive roles of investment in ETs and RD on GEG in EMEs. Therefore, policymakers should develop prudent policies to encourage ETs and RD to promote GEG in EMEs, which aligns with the goals of controlling climate variation (SDG-13) and fostering innovation (SDG-9) to promote GEG in EMEs.

Like technological advancement or long-run economic growth, evolution of global financial integration was not “a record of ever-moreperfectly-functioning markets with ever lower transaction costs and ever expanding scope” (Obstfeld and Taylor, 2002). Long-term growth of global financial markets was far from linear. Vicissitudes in the volume of financial flows were more common than uncommon. There were periods of slow growth in global financial integration, followed by those of rapid growth as well as periods of virtual standstill and reversals. There were periods when global financial integration was limited among a small number of countries, which were grouped in two or three categories and there were epochs when this integration expanded much more widely geographically. Liberalized markets did not enjoy high political popularity. Several periods witnessed strong reactions against market trends, in particular the financial markets. In the recent past, in the middle of the twentieth century and towards its end, such cynicism was easy to notice. Reacting to downsides of financial globalization, anti-market and anti-globalization voices became particularly strident towards the end of the last century.

Multiple equilibria in the dynamics of financial globalization: The role of institutions

As representatives of nation-states in global financial markets, sovereign wealth funds (SWFs) share a common form and many functions. Arguably their form and functions owe as much to a shared (global) moment of institutional formation as they owe their form and functions to the hegemony of Anglo-American finance over the late 20th and early 21st centuries. We distinguish between the immediate future for SWFs in the aftermath of the global financial crisis, and two possible long-term scenarios; one of which sees SWFs becoming financial goliaths dominating global markets, while the other sees SWFs morphing into nation-state development institutions that intermediate between financial markets and the long-term commitments of the nation-state sponsors. If the former scenario dominates, global financial integration will accelerate with attendant costs and benefits. If the latter scenario dominates, SWFs are likely to differentiate and evolve, returning, perhaps, to their national traditions and their respective places in a world of contested power and influence. Here, we clarify the assumptions underpinning the conception and formation of sovereign wealth funds over the past twenty years or so in the face of the ‘new’ realities of global finance.

Financial globalization encompasses integration of international money markets, international capital markets, and capital mobility across countries. For international financial investors (investors in financial securities), financial globalization means the ever increasing speed and freedom of moving funds across national markets. For emerging markets, due to the fact that their financial markets are still relatively primitive, financial globalization entails liberalization of domestic financial markets and relaxation of capital control to allow for financial capital inflows and outflows. Since the 1970s, there have been a few noticeable events in the international financial arena that involved emerging markets: the world debt crisis in the early 1980s, the Mexican peso crisis in late 1994, and more recently, the financial crises in Southeast Asia. Much of the enormous literature on these events has focused on the stability of international financial systems and on risk assessment and management on the part of international investors. Not much attention has been given to the impacts of these events on the emerging markets. This chapter seeks to understand the role of emerging markets in the global financial integration and the impacts of the swirls of capital flows on their financial and economic stability.

PurposeThe objective of this paper is to provide a macroeconomic assessment of the impact of global financial integration over the economies that are undergoing financial integration.Design/methodology/approachThe paper focuses on several issues. It begins with examining the evidence whether financial globalization elevates growth performance of the integrating economy and supports it macroeconomic stability. It takes a nuanced view and divides the impact of financial integration into direct and indirect benefits. Second, it scrutinizes whether there are some threshold conditions, that is, in their presence and with their support, financial globalization underpins growth and stability of the capital importing economy and in their absence it cannot. Third, it delves into the oft‐cited allegation of financial globalization being a source of macroeconomic volatility and eventually financial crises. Fourth, as the evidence that emerged regarding ability of financial globalization to underpin growth was unambiguous. Policy mandarins' options are examined.FindingsThe paper finds that from a theoretical perspective, it is easy to state that integration of financial markets an potentially faster growth. Whether it happens in reality is a different matter.Originality/valueThe paper explores a new theme. While there are many relevant themes in financial globalization, the author has not seen any article on this theme and this paper may well be the first.

Global financial systems' stability and integrity are seriously threatened by financial fraud. Financial institutions have been using artificial intelligence (AI) and machine learning (ML) technology more and more to improve their fraud detection skills in response to changing fraud schemes and growing complexity. The efficiency of AI-based fraud detection systems in identifying financial crimes and reducing risks, however, is still up for discussion and close examination. The purpose of this qualitative study is to investigate the application of AI-based fraud detection systems in financial institutions, as well as the associated problems. To gather information from important parties involved in the deployment and application of AI-based fraud detection systems in financial institutions, qualitative research techniques such as focus groups and semi-structured interviews will be used.

The article reveals the integration of domestic banks into the global financial system. An urgent issue today is the integration of the activities of domestic commercial banks into the global financial system, which is characterized by globalization processes. Globalization is a process of global economic, political and cultural integration, the main characteristics of which are the world division of labor, global migration of monetary, human and productive resources, standardization of legislation, economic and technological processes, as well as the convergence of cultures of different countries. The economic aspects of globalization are characterized by free trade, free movement of capital, reduction of taxes on the profits of enterprises, ease of movement of industries between different states in order to reduce the costs of labor and natural resources.

The bitter winds of financial crisis have once again swept global markets, this time beginning at the core of the system, Wall Street. Whether blame be assigned to private greed, public policy lapses, or both, vast sums of public money and shareholder capital have been wiped out in the otherwise noble cause of preventing systemic breakdown. Vulnerable citizens once more count the costs to the real economy. As massive liquidity has been made available to private financial institutions on exceptionally permissive terms, it has been difficult not to notice the striking contrast with the management of earlier crises based in the emerging markets. When they were in the dock, the emphasis was on the conditionality of the terms of rescue; with Wall Street and the City in trouble, the terms of rescue have been much more open-ended. As growing uncertainty combined with these apparent double standards, the crisis has reopened debate on the global financial architecture, public policy and regulation. Global financial integration and the governance of the global monetary and financial system stand at a crossroads after over thirty years of market-oriented cross-border integration and development preceded and indeed exacerbated a financial crisis on a scale not seen since the 1930s. This ongoing process of integration, regularly punctuated by crises and instability, raises analytical, normative and policy dilemmas which challenge our current understanding of financial and monetary governance. Many scholars argue that higher levels of economic integration require greater degrees of regional and global governance (e.g. Cerny 1995; Zurn 2004). Yet the relationships between economic integration, competitive market dynamics, international political cooperation and potentially new patterns of multilevel governance remain unclear as policy-makers face the difficult task of reform while still coping with the consequences of crisis. While the capacity of the current global financial architecture to cope with monetary and financial challenges is once again in serious doubt, the future direction of reform remains uncertain. To complicate matters further, not only the capacity and efficiency, but also the legitimacy

This paper aims to examine the revolutionary impact of digital technologies—specifically blockchain systems and central bank digital currencies (CBDCs)—on modern financial architecture and the processes of global economic integration. These technologies are rapidly transforming the structure and functioning of both national and international financial systems, placing states, markets, and institutions before new opportunities and challenges within the contemporary economic landscape. Blockchain technology, as one of the core components of Industry 4.0, is widely applied in areas such as peer-to-peer (P2P) transactions, trade finance, smart contracts, digital asset tokenization, and data protection. This research highlights its influence on the functional structure of financial markets, particularly in the context of international payments, transaction transparency, and cybersecurity. Simultaneously, the study explores the evolving role of traditional financial institutions—especially central banks—in the digital age. In Georgia, the emergence of blockchain-based startups in areas like payments, digital contract management, and data security is already evident, positioning this technology as a potential driver of economic transformation in the country. CBDCs, as digital currencies issued by central banks and directed both toward the general public (retail CBDC) and financial institutions (wholesale CBDC), differ from other digital innovations by serving as a strategic instrument that bridges monetary policy, sovereign currency systems, and international financial relations. In addition to blockchain, this study analyzes the potential role of CBDCs in global economic integration—specifically how they support the optimization of cross-border payment systems, increase financial inclusion, and strengthen digital sovereignty, particularly for developing economies. Furthermore, it addresses the geopolitical and regulatory complexities that accompany the global implementation of these technologies. Methodologically, the research employs a mixed-methods approach. The impact of blockchain is evaluated using financial market indicators from Yahoo Finance and Bloomberg, as well as global digital governance indices. The analysis of CBDCs relies on documentary review, including reports from international organizations (e.g., IMF, BIS, World Bank), academic literature, and regulatory frameworks developed by central authorities. The paper is structured as follows: the first section discusses the theoretical and practical aspects of blockchain technology; the second section focuses on the technological and policy foundations of CBDCs; the third section examines their impact on areas such as international trade, financial policy, monetary independence, and cybersecurity. Finally, the case of Georgia is presented as an example of the combined influence of blockchain and CBDCs in an emerging economy. The study’s main conclusion demonstrates that the integration of blockchain and CBDCs is transforming the rules of the game in financial markets. The technological architecture is shifting to a new digital paradigm, where fast, low-cost, and secure transactions are replacing traditional financial intermediaries. Simultaneously, the role of central banks is being strengthened in monetary and credit policy, while their responsibilities regarding cybersecurity and data protection are also expanding. Successful implementation of CBDCs will significantly enhance both domestic financial stability and participation in global monetary relations—provided that international cooperation, legal frameworks, and technical standardization are effectively developed. Similarly, the application of blockchain technology—particularly in Georgia—requires a strategic vision and infrastructure support to harness its potential not only for improving financial products but also for fostering economic development and integration into the global system. Therefore, this paper confirms that the digital technology revolution—namely blockchain and CBDCs—represents not only a technological shift but a profound structural transformation in the global financial architecture, requiring integrated policy approaches and coordinated actions at both national and international levels. Keywords: Blockchain technologies, digital currency, central bank, financial markets, economic integration, Georgian economy, CBDC, international trade, monetary policy.

Islamic finance has become one of the most dynamic segments of the global financial system, valued at approximately US$ 4.5 trillion in 2022 and projected to exceed US$ 6 trillion by 2026. Rooted in Shariah principles that prohibit riba (interests), gharar (excessive uncertainty), and haram (unethical activities), it presents a faith-based and ethically grounded alternative to conventional finance. This article critically investigates the future of Islamic finance, analyzing its transformative trends, systemic challenges and theoretical foundations. Employing a qualitative and conceptual methodology, the study synthesizes secondary data from industry reports, policy documents and academic literature (2020-2025) to generate a multidimensional perspective. Eight major trends are identified, including the rise of Islamic fintech, green sukuk and ESG convergence, cross-border expansion, social finance institutionalization, Shariah standardization, human capital development and integration with global financial architecture. These are juxtaposed to eight critical challenges, such as regulatory fragmentation, authenticity concerns, limited literacy, talent deficits, governance lapses and political-institutional restrictions. The comparative insights from Malaysia, Pakistan and global jurisdictions highlight contrasting pathways, with Malaysia demonstrating proactive innovation and Pakistan undergoing a rapid but institutionally constrained transformation. The analysis is framed through six theoretical perspectives—Maqasid al-Shariah, Stakeholder theory, Institutional theory, Legitimacy theory, Resource-based view, and Financial Intermediation theory—demonstrating how authenticity, innovation, and global integration can be harmonized. The results suggest that the future of Islamic finance depends on the strengthening of Shariah authenticity, leveraging digital transformation, advancing regulatory harmonization, and positioning Islamic finance as a partner in global sustainability. This study contributes conceptually by integrating theoretical perspectives with empirical evidence of the industry and practically by offering strategic recommendations for regulators, financial institutions and international bodies. Finally, it positions Islamic finances not merely as a parallel system, but as a civilizational model capable of advancing inclusive, ethical and sustainable economic development