Advanced economies still continue to be the most financially integrated. Yet other regions of the world have also increased their cross border asset and liabilities positions, albeit at a much more moderate pace. These differences can be explained with different capital control regimes as well as a range of other factors, including different degrees of institutional quality and domestic financial development.
Such a divergence might impair the effectiveness of macroeconomic policies. It might be useful in this respect to recall the experienced of the 1970s, after the first oil crisis, when economic policies did not take into account that the higher oil price had reduced potential growth in advanced economies and calibrated their policy response to an unrealistic target.