In other words, a central bank that relies on a model that does not take rising trade integration into account when it should do so will tend to react too gradually and perhaps insufficiently to external shocks. This would run the risk of inflation deviating from target for longer than desired.
As the industrialized nations’ economies grew in the eighteenth, nineteenth and twentieth centuries, their financial systems also grew in depth and breadth. In the 19th century, London achieved its status as the world’s leading financial centre, because the financial sector had developed rapidly in order to serve the needs of British industry and British exporters.