Proceedings of the 2nd Economics & Finance Conference, Vienna

FINANCIAL PERSPECTIVES OF GLOBALIZATION IN EMERGING ECONOMIES – CONCERNS FOR INDIA

K L CHAWLA, PANKAJ KUMAR GUPTA

Abstract:

Emerging economies (BRIC) are now on forefront of globalization in the resent scenario. From a financial perspective, globalization has resulted in huge financial flows to these economies that inter-alia include Portfolio investments by Foreign Institutional Investors (FII), Foreign Direct Investment by firms and institutions, External commercial borrowing and international resource mobilization. We argue that this spurt in financial globalization has resulted in volatility in financial markets, particularly stock markets and indirect contribution to GDP growth rate simultaneously creating concerns for the government policy makers and regulators especially in a country like India. We examine the case of India via investigation on association between GDP and stock market volatility and other selected macro economic indicators. The results on co-integrations, regression and GARCH specifications indicate that a positive significant impact of globalization on India's financial indicators. We find portfolio investments as deterrents to stock market volatility. Also, in some cases we find no integration across BRIC nations on selected macro economic variables.

Keywords: Financial Globalization, Foreign Direct Investment (FDI), Gross Domestic Product (GDP), Volatility, Foreign Institutional Investors (FII)

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