Which of the following is a characteristic of the 'Global Financial Cycle' hypothesis?
A.Co-movements in capital flows, asset prices and credit growth across countries are driven in large part by global factors, especially US monetary policy
B.Capital flows are always driven by local pull factors
C.Only domestic monetary policy matters
D.National financial conditions are completely independent of global factors
Explanation:
The global-financial-cycle hypothesis emphasises that fluctuations in global risk appetite, often linked to US monetary policy and the strength of the dollar, generate correlated movements in capital flows, credit and asset prices across many countries.
Explanation:
The 1991 economic reforms focused on Liberalisation, Privatisation and Globalisation (LPG) to open up the economy, reduce government control and integrate with the global economy.
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