While some researchers often point out that the current level of openness of international capital markets is still lower than that prevailing before World War I, there is no doubt that we live in a world in which advances in financial and communications technology combined with regulatory and institutional changes have led to international capital markets and financial institutions becoming more closely interrelated than ever in the past.
5 Growing financial integration among countries and regional areas is a potential source of benefits, notably due to enhanced opportunities for international risk sharing. Indeed, financial globalisation may provide countries with instruments to hedge against idiosyncratic shocks in order to better smooth consumption smoothing, thereby yielding significant welfare gains.