While some researchers often point out that the current level of international financial integration is not unprecedented by historical standards, there is no doubt that we live in a world in which advances in financial and communications technology combined with regulatory and institutional changes have led to financial markets and institutions becoming more interrelated across borders and time-zones than ever before.
1 Growing financial integration across borders is a potential source of benefits, notably due to enhanced opportunities for international risk sharing. Indeed, financial globalisation may provide countries with instruments to hedge against idiosyncratic shocks in order to better smooth consumption smoothing, thereby yielding significant welfare gains.