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The new dynamics of financial globalization

Back to Shifting globalization

The new dynamics of financial globalization

After a decade of aftershocks from the seismic financial crisis of 2007, the landscape of global finance is much altered. Global cross-border capital flows—including lending, purchases of equities and bonds, and foreign direct investment—have shrunk by 65 percent since 2007, from $12.4 trillion to $4.3 trillion. Half of that decline reflects a sharp reduction in cross-border lending and other banking activities. Large European banks—particularly those in the eurozone—are leading the retreat from foreign markets.

But MGI research found that it would be wrong to conclude that financial globalization is over. Financial markets around the world remain deeply interconnected. The value of foreign investment as a share of global GDP has changed little since 2007, although its rapid growth pre-crisis has ended. Instead, the research finds that what is emerging from the rubble is a more risk-sensitive, rational, and ultimately more resilient version of global financial integration.

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Financial globalization

The new dynamics of financial globalization

In the media

Financial globalization
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Financial Times: Globalisation in retreat; capital flows decline since crisis

Financial globalization
Article

The Economist: How the shape of global banking has turned upside down

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Fortune: Here’s what central bankers should really be focusing on at Jackson Hole

Article

Harvard Business Review: As European banks retreat from the world stage, China is stepping up

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Project Syndicate: Financial globalization 2.0

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Financial globalization hits a more stable, inclusive stride

– After the global financial crisis, a number of countries stepped back from the world stage, choosing to instead focus on domestic capital while being more selective about foreign investments.

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