Indeed, it is important not to forget that financial integration can potentially yield many benefits to our economies, particularly by rendering them more stable and resilient. Indeed, one key channel through which financial integration improves the resilience of the global financial system is risk sharing.
Markets largely recovered from that episode, but an imprint was left in the form of wider credit spreads and more cautious behavior on the part of banks and other lenders. Recently, wariness about risk again has increased as default rates on less than investment-grade bonds have moved higher, debt downgrades have become more commonplace, and many high-flying dot-com ventures have collapsed.