The future of financial globalisation
The BIS 11th Annual Conference took place in Lucerne, Switzerland on 21-22 June 2012. The event brought together senior representatives of central banks and academic institutions, who exchanged views on the conference theme of "The future of financial globalisation". This volume contains the opening address of Stephen Cecchetti (Economic Adviser, BIS), a keynote address from Amartya Sen (Harvard University), and the available contributions of the policy panel on "Will financial globalisation survive?". The participants in the policy panel discussion, chaired by Jaime Caruana (General Manager, BIS), were Ravi Menon (Monetary Authority of Singapore), Jacob Frenkel (JP Morgan Chase International) and José Dario Uribe Escobar (Banco de la Repubblica).
The papers presented at the conference and the discussants' comments are released as BIS Working Papers 397 to 400:
1 Financial Globalisation and the Crisis, BIS Working Papers No 397
by Philip R. Lane
Comments by Dani Rodrik
The global financial crisis provides an important testing ground for the
financial globalisation model. We ask three questions. First, did
financial globalisation materially contribute to the origination of the
global financial crisis? Second, once the crisis occurred, how did
financial globalisation affect the incidence and propagation of the
crisis across different countries? Third, how has financial
globalisation affected the management of the crisis at national and
2 The great leveraging, BIS Working Papers No 398
by Alan M. Taylor
Comments by Barry Eichengreen and Dr. Y V Reddy
What can history can tell us about the relationship between the banking
system, financial crises, the global economy, and economic performance?
Evidence shows that in the advanced economies we live in a world that is
more financialized than ever before as measured by importance of credit
in the economy. I term this long-run evolution "The Great Leveraging"
and present a ten-point examination of its main contours and
3 Global safe assets, BIS Working Papers No 399
by Pierre-Olivier Gourinchas and Olivier Jeanne
Comments by Peter R Fisher and Fabrizio Saccomanni
Will the world run out of 'safe assets' and what would be the
consequences on global financial stability? We argue that in a world
with competing private stores of value, the global economic system tends
to favor the riskiest ones. Privately produced stores of value cannot
provide sufficient insurance against global shocks. Only public safe
assets may, if appropriately supported by monetary policy. We draw some
implications for the global financial system.
4 Capital Flows and the Risk-Taking Channel of Monetary Policy, BIS Working Papers No 400
by Valentina Bruno and Hyun Song Shin
Comments by Lars E O Svensson and John B Taylor
This paper examines the relationship between low interests maintained by
advanced economy central banks and credit booms in emerging economies.
In a model with crossborder banking, low funding rates increase credit
supply, but the initial shock is amplified through the "risk-taking
channel" of monetary policy where greater risk-taking interacts with
dampened measured risks that are driven by currency appreciation to
create a feedback loop. In an empirical investigation using VAR
analysis, we find that expectations of lower short-term rates dampen
measured risks and stimulate cross-border banking sector capital flows.