As such, globalization may have increased the penalties for bad public and private policies, but the correct response is to get policy right, not to turn the clock back on globalization. Globalization has increased the spillovers of economic events across countries.
For example, during the Asian financial crises of the late 1990s, investors downgraded their expectations for the future profitability of investments in emerging Asia. The resulting financial flows drove up the prices of U.S. bonds and equities at the same time that Asian demand for U.S. exports fell and the U.S. current account deficit widened.