Global Financial Systems Under Scrutiny
A collaborative study by Griffith University, Charles Darwin University, and Ho Chi Minh City University of Economics and Finance reveals the substantial impact of red tape and regulations on international financial markets. This research, spanning 17 G20 economies from 1996 to 2022, highlights how regulatory quality and global power influence market dynamics.
Regulatory quality refers to a government’s ability to implement policies that support private sector development, while global power includes a country’s economic, political, and military influence. The study shows that both factors enhance stock market integration, particularly following the financial nationalism of post-2020.
Associate Professor Rakesh Gupta from Charles Darwin University noted, “These factors combined can lead to market fragmentation, especially in countries like the United States and China, where institutional power supports financial leadership yet buffers against full global market synchronization.”
Fragmentation Driven by Geopolitical Tensions
The research emphasises the role of geopolitical tensions and regulatory differences in accelerating global financial system fragmentation. It calls for improved international coordination, enhanced digital and climate finance frameworks, and stronger global institutions to ensure financial stability and inclusion.
Sama Haddad, lead author and PhD candidate at Griffith University, stressed the importance of international cooperation. “Financial integration is no longer uniform; it depends on how regulatory strength and global influence interact,” she stated, pointing to the need for cross-border policy coordination.
The study identifies the United States as the only country with both high regulatory quality and global power. Canada, Australia, the United Kingdom, Japan, and Germany have high regulatory quality but lower global power. China’s global power has risen to levels near the United States, though its regulatory quality remains variable.
Argentina was found to have the lowest regulatory quality among the countries examined, highlighting disparities in financial market management and the implications for global economic stability.
Following these findings, researchers recommend that countries focus on improving regulatory quality and forming international alliances to strengthen their global market positions. This strategy could help mitigate risks associated with financial nationalism and geopolitical tensions.
Last updated: 5 May 2026, 4:49 pm
