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The objective of this article is to examine the evolution of the global financial markets during the post-World War-II era, when they were in a moribund state. In 1973 quadrupling of oil-prices occurred, which proved to be a seismic economic event that affected the global economy and financial markets. Around this period, a good number of lower- and upper-middle income developing economies broke from their tradition of following erroneous and unproductive economic strategies. They committed to improving the macroeconomic and financial climate in their economies by carrying out macroeconomic reforms and restructuring of their economies. The collapse of the Bretton Woods regime was a defining moment for the world of global finance. It was followed by a notable surge in cross-border capital flows from the private global capital markets. With the largest industrial economies of the world abandoning the concept of capital control and with an increasing amount of financial activity taking place in the Eurodollar markets, other countries had little choice but to open their financial sectors as well. Developing economies could not remain impervious to the on-going transformations in the financial markets of the advanced industrial economies and the global financial markets for long. Their domestic financial and capital markets reacted to the forces of change in the advanced industrial countries as well as to the ongoing financial globalization and innovation.
While financial globalization during the preceding three decades proliferated broadly, it did not proliferate evenly across the globe. There was a marked difference in the extent of integration around the globe. Neither all regions integrated financially uniformly, nor all financial crises had comparable impact over financial integration of different economies. Due to the negative impact of the crises of 1997 and 1998 over the global private capital markets and investor confidence, global investors began considering the developing economies to be unsafe for investment.