International Initiatives to Bring Stability to Financial Integration

Financial liberalization and integration have generated disappointing results. They were supposed to set up a win-win situation: capital would flow from capital-abundant, low-return, aging industrial countries to capital-scarce, high-return, young emerging countries. Growth in receiving countries would accelerate and both giver and receiver would be happier, while everyone's diversification opportunities improved. As a bonus, emerging market policymakers would be disciplined by losing access to a captive local financial market.