Greater international integration, in these three dimensions, has two main implications. The first is increased interdependence. Shocks are transmitted more rapidly across borders via trade, corporate outsourcing and financial markets. This implies that national policy decisions now have greater potential spillover effects. The second implication – partly a mirror image of the first – is greater risk diversification.
Should central banks exploit innovative transmission mechanisms, for example those suggesting that interest rates should be increased to jolt the economy away from an ultra‐low inflation trap? Size and composition of central bank balance sheets Traditionally, central banks used only short‐term interest rates to steer the economy.