In a rapidly globalising world, the decoupling theory was never totally persuasive; given the evidence of the last few months – capital flow reversals, sharp widening of spreads on sovereign and corporate debt, and abrupt currency depreciations – the decoupling theory has almost completely lost credibility.
We have to counter pro-cyclicality, which is one of the features of global finance today, amplifying the booms and the busts of global economy. Promoting and improving transparency, countering short-termism and eliminating as much as possible procyclicality are three of the most important avenues we have to take.