It is important not to forget some of the key benefits from cross-border financial integration, since capital inflows complement local savings, provide a larger availability of financial resources for the economy and foster economic growth. Additional benefits from financial integration may be obtained, conditional on the institutional arrangement of each emerging market.
From a policy standpoint, neither deficit may be terribly harmful in the short run, and at least the recent fiscal deficits have been useful in stabilizing movements in output. Moreover, there is likely to be a credibility range in which debt levels could rise relative to GDP without much change in relative prices.