As regards the first dimension, the notion that financial integration which is based on long-term instead of short-term capital flows is more resilient has become increasingly persuasive.
For the second, it has been recognised that financial integration typically only delivers lasting positive effects on growth if countries meet certain thresholds of institutional development.4 In the absence of sufficient institutional development, capital flows would most likely be used unproductively, feeding unsustainable lending booms and encouraging excessive short-term capital inflows.5 This can in turn leave countries vulnerable to sudden stops once optimism fades due to local or global shocks.