Indeed we have witnessed that in a financially integrated market risks can spread and spillover to other segments of the financial market, increasing the likelihood of contagion of financial fragilities and systemic risks. So has this recent experience changed our view about the benefits of financial integration? Not at all!
It is true that the cause of the financial crisis has many dimensions – which we still need to study carefully. But a key issue has been loose regulation and supervision, opaqueness of financial products and practices, massive mispricing of risk and a distorted allocation of resources.