Similarly, a country cannot perfectly control the business cycle; its income also depends on worldwide conditions that matter for its imports and exports. At any moment in time, there can be mismatch between a borrower’s income and his expenditures.
Without access to capital markets, without the ability to borrow, banks would have to cut lending and countries would have to limit the provision of services once their income dropped. The ability to borrow therefore insures against shocks to income and ensures the smooth functioning of an economy. Access to capital markets improves ex post efficiency.