Research has found that a fall in interest rates in the United States stimulates cross-border credit flows and investment in the rest of the world, because it allows the large global banks to raise funds cheaply in the “core” of the financial system and invest them profitably in the “periphery.” 3 Leaving aside the implications for financial stability, this means that the recent monetary expansions in the US and in Europe may have boosted income in relatively poorer parts of the world, thereby reducing between-country inequality.
The nine papers at this conference make a variety of welcome contributions in this area.