How global are global financial markets? : the impact of country risk

Financial transactions are costly. On the one hand, processing a transaction requires resources, on the other hand the regulatory framework is costly as well. In both areas there have been dramatic changes recently. Computerisation and advances in telecommunications lead to considerably lower technical costs. Furthermore, deregulation has eliminated many barriers to trade. Financial markets have become and still are in the process of becoming more open, and one often hears of the “globalisation of financial markets”