Banking De-Globalisation: A Consequence of Monetary and Regulatory Policies?

Abstract

Countries around the world have tended to become more closely linked through the movement of goods, capital and people over time. It is often argued that this globalisation is a seemingly irreversible trend that can only move in one direction, especially in international finance. For example, Figure 1a shows one measure of cross-border financial integration – the sum of capital flowing in and out of a country by foreigners and domestic residents each year (scaled as a share of global GDP) for a group of advanced economies with data back to 1970.5 These capital flows increased sharply over the 15 year window starting in 1990 – a trend which many believed would continue (albeit with some ups and downs around this longer term trend as had traditionally occurred).

Full publication: Macroprudential Policy