Recent research shows that capital market depth was critical in helping the US dollar to catch up with, and then overtake, the pound sterling in the first half of the last century. Financial deepening was by far the most important contributor to the increase in the share of dollar-denominated international bonds issued between 1918 and 1932.
Its impact dwarfed that of economic size or credibility. [25] Chiţu, L., Eichengreen, B. and Mehl, A. (2014), op. cit. European capital markets appeared to be becoming more integrated, and hence deeper, prior to 2008. But this impression was based more on price convergence than on real cross-border integration.