Question

In the past, financial markets and institutions were less integrated due to distance or lack of technology. But as the speed of communication increases, markets become more integrated, making interest rates more volatile to changing conditions. Even if a shock doesn’t occur in the same location as one FI, it will still be affected due to its connection with other markets, lenders, borrowers, and the government.

What does everyone think about this statement? Do you agree or disagree?

Answer 1

I agree with the statement and this has happened because of globalisation. The markets are interconnected and so are the businesses. If the economy in one country which is reflected by the share market of that industry declines it will certainly have an impact on other markets. The result is that the stock market of the Other economy is also impacted. So the statement is true that if a shock occurs at one location it will impact the other locations as well.