Do the patterns of capital flows suggest that global financial markets are approaching full integration? And, most important, what do the answers to these questions imply regarding the potential for future contributions of globalization to economic growth and financial stability? Has the Pace of Financial Innovation Begun to Slow?
Although the pace of innovation cannot be measured with precision, important new instruments continue to emerge. Credit derivatives arose only in the early to mid-1990s. Still more recent has been the marriage of derivatives and securitization techniques in the form of synthetic collateralized debt obligations (CDOs).