Improving the governance of financial markets was lagging behind, leaving the system vulnerable to crises. We now understand that liberalization and governance are complements. We need them both to reap the benefits of financial integration in a sustainable manner.
The first is the movement in relative prices that is occurring within the economy. The most obvious relative price that has shifted – and the one we have spoken most about – is the price of Australia’s exports relative to the price of our imports – what economists call the “terms of trade”.