I. Introduction
Since the late 1980s globalization has been the word most used to characterize our
world. Globalization often means economic phenomenon and consequences entailed by
information and technology revolution. Liberalization of trade and finance, free flow of
goods, service and labor, and global production network are its main matters. This kind of
new market movement is not to be hindered and controlled by any one, country and
international organization. Giddens (2000: 20) describes this kind of uncontrollability as
“it seems out of our control – a runaway world.” This globalization influences every nook
and corner in the world with a speed of the twinkling of an eye. IT revolution enables
capital, goods and service to move and transfer among countries instantly. Accelerated by
the establishment of the World Trade Organization (WTO), national border in terms of
economy is dismantled and national market is worldly integrated. To reduce cost of
production and customize local demands corporations move their production facilities to
the other countries hunger for foreign investment and willing to provide investment
incentives.
The financial globalization is the most distinguished among the phenomenon generated
by globalization. Financial liberalization becomes a major economic policy and
international agreements on international investment and capital transfer further to pull
down the wall of capital mobility. We have witnessed sudden increase of international
capital transfer since the late 1980s. “The volume of foreign exchange trading in the late
1990s has been approximately $1.5 trillion per day, an eightfold increase since 1986; by
contrast, the global volume of exports (goods and services) for all of 1997 was only $6.6
trillion, or $25 billion per day!” (Gilpin, 2000: 140).
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Another distinctive feature of
financial globalization is a massive inflow of capital into emerging markets. Until the late
1980s the yearly mean of capital inflow into developing countries was less than 50 billion
dollars. However, the yearly mean in 1996 was more than 300 billion dollar that is a six-
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There is a different view on the broad patterns of financial development in advanced countries.
Rajan and Zingales (2000) argues that developed countries were more financially developed in 1913
than in 1980.
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Convention