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RISKS OF INTERNATIONAL FINANCIAL SYSTEM IN THE
CONDITIONS OF GLOBALIZATION
Tursunxodjayeva Sh.Z.
Tashkent institute of Finance, PhD
Tillayev U.E.
Tashkent institute of Finance, master
The international financial system has undergone significant changes in recent
decades, largely driven by the process of globalization. The integration of economies
and financial markets across borders has brought about
unprecedented levels of
economic growth and development, but it has also created new risks and challenges.
In this essay, we will discuss the risks of the international financial system in the
conditions of globalization.
One of the major risks of the international financial system is the possibility of
financial crises that can spread quickly across borders. Globalization has led to an
increased interconnectedness of financial
markets and institutions, and this
interconnectedness can amplify the impact of financial shocks. For example, the
Asian financial crisis in the late 1990s started in Thailand but quickly spread to other
countries in the region and beyond, causing a ripple
effect that led to economic
recession in many countries. The global financial crisis of 2008, which originated in
the United States, similarly had a significant impact on economies worldwide.
Another risk of the international financial system is the potential for contagion.
The globalized nature of financial markets means that problems in one country or
region can quickly spread to others, as investors and financial institutions react to
news and market movements. This can lead to a self-reinforcing
cycle of panic and
instability that can be difficult to contain.
A related risk is the challenge of managing capital flows. In a globalized
financial system, capital can flow freely across borders, and this can create instability
and volatility in financial markets. Rapid inflows of capital, for example, can lead to
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overvalued exchange rates and asset prices, while sudden outflows can cause
exchange rate and financial market volatility, and potentially trigger financial crises.
Finally, the international financial system is also
vulnerable to political and
regulatory risks. Globalization has led to increased coordination and cooperation
among governments and international organizations in managing the international
financial system, but it has also created new tensions and conflicts. The imposition of
trade barriers and sanctions, for example, can disrupt
financial flows and cause
economic instability. Moreover, regulatory gaps and inconsistencies across
jurisdictions can create opportunities for regulatory arbitrage, where firms take
advantage of differences in regulatory regimes to
avoid oversight or exploit
loopholes.
In conclusion, while globalization has brought significant benefits to the
international financial system, it has also created new risks and challenges. The risks
discussed in this essay, including the potential for financial crises, contagion, capital
flow management, and
political and regulatory risks, require ongoing attention and
management by policymakers and market participants alike. Only by carefully
managing these risks can we ensure that the international financial system continues
to contribute to economic growth and stability in the years ahead.