By standing on each other’s shoulders the bird is able to reach the fruit for all of them. Preventing future global financial crises requires us to understand the web of mutual interdependence characterised by the endless knot, and the wisdom of the four friends.
Despite the invaluable data gathering and research by the BIS, our understanding of the drivers and impact of cross-border financial linkages remains limited in many areas. Our theoretical benchmark for much policy analysis continues to be based on capital-free arbitrage that assumes efficient and smooth changes in asset prices, with no material effect for capital flows.