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The development of the regional markets to global level and innovative developments in the technology field has greatly boosted growth and expansion of financial markets. Capital markets in the emerging economies are quite evident and this is a direct result of global links in financial development policies. The rapid economic growth and industrialization process in the emerging economies is also attributed to the globalization of the financial markets which significantly promote capital inflows (Agtmael 2007).
On the other hand, economic problems and financial crises in other nations could easily be transferred to other countries as a result of these interactions. This was evident with the Asian currency crisis of 1997 that affected the major economies of the Asian region; the Russian financial crisis that saw countries of former Soviet Union suffer an economic depression and the disintegration of the long-term capital management in 1998 (Kahn 1979).
Many countries have now undertaken a process of finding a solution to such occurrences in future and the most notable research is that conducted by the Japanese central bank. The World Disinflation Trend Structural changes in the global financial market have influenced the international, market environment in terms of prices of products. In 1990s the world experienced a change in disinflation rates reflected by a notable increase in the supply of products to the world market as a result of the rapid industrialization in the emerging market economies.
Development and innovative technology plus anti-inflation policies adopted by many nations also played a significant role in the disinflation development. The inflation rates in the Group of eight (G-8) countries declined by about 3-4%, these countries are the greatest economies in the World of all nations and they include; United States, Germany, Japan, Italy, Canada, Britain, Russia and France (Drori et,al 2006). Significant of them all is Japan which has experienced a faster deflation rate resulting in prices of consumer goods ranging from less than one to about zero percent.
The European countries and the United States are the great beneficiaries of the disinflation phenomenon that resulted from the economic polices in the early 1990s. These nations has earned real economic base for their financial and commercial activities leading to a steady expansion of economy and consumer price stability (Kahn 1979). The European monetary union is a great success due to reduced inflation in the member countries.
The great economic depression was an eye opener to most of the countries and this lead to change in economic policies of many central banks in different nations. Most of the nations that are in the developing stage are currently mare concerned about the threat of price decline which has not occurred for quite some time now since the great economic depression. These economic development have lead to better financial services in the US and European nations. The federal reserve reduced its rated from 6. 5 % to 1.
25% between 2001 and 2002, the European central bank on the other hand reduced refinancing rates by half and by the year 2003 it was about 2. 0 % from 4. 75% in the year 2001 (Drori et,al 2006). Central banks in the group of eight countries are concerned about calls by other economies to reduce short-term interest rates. Such conventional monetary policy is intended to stimulate economic activities that target the lower zero bound short term interest rates. Such policies are borrowed from the bank of Japan which established the trend in 2001 (IFM 2003).