Abstract
As the world continues to see various facets of financial integration, the topic has sparked a great deal of discussions among policymakers and economists. The article analyzes benefits and risks of financial integration in the context of the European Union, which has facilitated global financial integration immensely by creating common currency among European Monetary Union countries and harmonizing regulations across the region. Upon examining main pros and cons of financial integration in detail, I conclude that financial integration can be beneficial in the longrun if corrective and preventive measures are enforced to curtail risks and threats it poses.
Highlights
Global financial integration is not a new phenomenon-rather the topic has been debated quite fervently over the past few decades
Depending on the divergent results it generates in countries, global financial integration is either a benefactor or a menace
The region is exceptional in the sense that currency risk is non- existent among Economic and Monetary Union (EMU) countries thanks to the creation of the euro
Summary
Global financial integration is not a new phenomenon-rather the topic has been debated quite fervently over the past few decades. This demonstrates the rising magnitude of international financial integration and its potential implicationsboth good and bad. On the one hand, developed countries enjoy higher returns on investment across international markets. On the other hand, developing countries share risk in the presence of adverse output shocks and smooth consumption. Increased financial integration is associated with mounting volatility and crisis contagionwhich may cause one to reassess the benefits
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