Study On Financial Globalization And Fianancial Stability Issues

The U.S. subprime crisis caused market turmoil and economic panic along financial ties between the United States and other countries. From February 13,2007, the start of subprime mortgage crisis, to October 2008, the whole world no matter if the European Union, Japan and other developed countries, or emerging markets such as China are all affected by the crisis, despite of the adoption of appropriate rescue measures. The crisis even lead to the current voice of changing the international monetary system intensified. In this context, financial stability, become a hot topic again after the 1997 Asian financial crisis. In particular, as an important pillar of the world economy, the financial stability of emerging markets is even more important, no matter practically or theoretically.This paper summarizes the financial stability of the relevant researches on the concept of financial globalization, the current situation and made a preliminary study results; then reviewed the context of financial globalization on several major source of financial instability and the well-known financial crisis cases. On this basis, the impacts of U.S. sub-prime market crisis is analyzed through an empirical study, and the causes of the sub-prime crisis and America’s response strategies are discussed; then presented with a stress test system to assess the financial stability and prevent crises, to build a comprehensive financial safety net to reduce and mitigate impacts of the crisis; Finally, the paper discussed the issues of China’s development based on financial globalization and financial instability and bring several points: China should move towards self-dominated economic growth mode transformation, and conduct RMB internationalization process based on new market expansion, to maintain financial stability, thereby achieving further economic and social development.This paper discusses the financial globalization and financial stability issues from eight major parts:The first part is an introduction. This part described the research backgrounds and significances, summed up the theories of financial globalization and financial market crisis model, the currency crisis, debt crisis in the financial instability. Thenthe organization, research methods and innovations of this paper are introduced.The second part, beganwith the status and impact of financial globalization, discussed the benefits and risks of financial globalization and policy options for governments, and gives a more comprehensive overview of financial globalization. This section pointed out that financial globalization brought obvious development opportunities to developing countries, but also presented new challenges: first, management requirements of the financial system upgraded; second, globalization makes domestic policy of a country much less effective, and thus demands international financial cooperation.The third part of the paper focuses primarily on the context of the source of financial instability and financial crisis, several major crisis types, and to explore whether different types of financial instability arising from a common cause, and whether there existed a relationship between globalization and crisis. In addition, this part also focused on a large number of cases of the last twenty years of the twentieth century, particularly the financial turmoil, over-finance and over-trading case, and laid the groundwork for the forthcoming discussion of the U.S. subprime crisis.The fourth section adopted event study method to analyze the impacts of the sub-prime crisis in the financial markets. Select some types of companies in different industries, analyzed by the impact level of the subprime mortgage crisis, and to explore the implicit causal relationships. Empirical analysis shows that the impacts of the sub-prime crisis are dramatic and will result in a number of industrial shocks through chain reaction. This section pointed out the need to build a system of prevention and response system in in the context of globalization and today’s financial instability.The fifth part, based on the previous empirical analysis, discussed the formation of the sub-prime crisis and the U.S. Government rescue strategies. This section explores the structural causes of the subprime mortgage crisis, noting that industrial operations has gradually moved to the core of the financial transaction, the economic structure has become a huge inverted pyramid, and such financial pyramid structure can never be stable. The U.S. government eased the crisis severity through the Troubled Asset Relief Program, financial stability plan, mortgage protection, fiscal stimulus and liquidity measures. The relevant coping strategies are both referential and some also worthy of reflection, for building the financial stability of financial systems under the age of globalizationThe sixth part evaluated the necessity and difficulty of building a monitory system of financial health status through the variety of financial stability properties, pointing out that the evaluation of financial system is a comprehensive and iterative process. This part gave a full description of the financial system stress testing which under rapid development in recent years and attracted widespread attention after the sub-prime crisis. The stress tests might combine the two advantages of quantitative measures and qualitative intuitive, and are quite important on the assessment and prevention of financial non-stability. At the same time, this section points out that the stress test may reveal potential risks of financial system, market participants can achieve positive results of self-realization through active participation.Part VII of the paper discusses the assessment and prevention of financial instability, and how to build financial safety nets to bring relief and to contain financial instability. This section first gives a brief introduction of financial safety net and then focuses on the deposit insurance system and its role in the program, followed by the analysis of transactions of the investor protection measures, non-bank financial institutions, capital adequacy, and financial market liquidity provision. The last is an interpretation of the impacts on market efficiency and regulation.Part VIII of the paper discussed China’s financial and economic development on the context of the subprime crisis and financial globalization. The after-effects of the global financial turmoil call great demands of the acceptance of financial globalization. It is not only an important guarantee for the further economic and social development, but also a mega-trend of the future international monetary system. The experiences of the thirty years by finding new markets to solve the problem of economic growth in China beckons to us, in the new financial and economic context, the ultimate path to future development is still to promote institutional development and expand market development. China still needs to be open attitude to participate in global activities. The task of building the new era landed in the Asia, and the whole world.