Research Log 4

Kenen, Peter. "The Benefits and Risk of Financial Globalization." 179.

Peter B Kenen explores the benefits and risk of a world economically globalized. He shows what are the mistakes that governments have done that contributed to many financial crisis in our modern era and the ways to be followed for a successful integration of the world’s economy.
Our best example of almost fully integrated economy is the Euro Zone. They share a common currency, no requirement of visas to cross each other boarders and a central government called the European Union (although every country has their own central government). The benefits of this union were clarified before the accord was taken. Economist believed that the integration would promote commerce through the decreasing of shipping costs among members, more number of merges of European companies consequently strengthening their business against other business from foreign economies and so on.
However the financial unification also has its adverse side. In a union such as the European, a crush in a single member economy could cause a domino effect which other members become susceptible to a crush of their economies as well. The European Union is the world’s experiment regarding a future completely globalization and since our planet is becoming everyday much more globalized the mistakes and benefits of this experiment should be carefully analyzed so we can be ready and not surprised in future events
Kenen wisely describes the subject “It is also worth noting that the gains from financial integration have not been as large or widespread as many economists expected when they confronted the data. A remarkable paper by four economists, Kenneth Rogoff and three of his former colleagues at the International Monetary Fund (Kose et al. 2006), has surveyed the very large body of research on the gains from integration—whether and to which extent it has fostered economic growth in the developing countries. To some significant extent that large body of research is flawed analytically. Much of it, for example, relies on overly simplistic measures of the degree to which countries restrict international capital flows, and much of it also fails to distinguish between the effects of capital controls and of other institutional features of the countries under study”
I will probably focus big part of my research paper in the financial globalization as well. First of all I am a finance major, and I have been reading about the subject every single day of my life in the past 3 years. Second, the world economics is the driver of our today’s world, if the economy does bad, everything else does bad as well. The gas gets too expensive, the value of your house drops considerably, that new car becomes only a dream, and it becomes hard to pay your kids college tuition. So for great world unification we need a great unified economy, in which policy takers and householders think on the same direction, to avoid generalized collapses in the world economy.