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Risk and Global Economic Architecture: Why Full Financial Integration May Be Undesirable

Joseph E. Stiglitz

Title:
Risk and Global Economic Architecture: Why Full Financial Integration May Be Undesirable
Author(s):
Stiglitz, Joseph E.
Date:
Type:
Articles
Department:
Economics
Volume:
100
Permanent URL:
Book/Journal Title:
American Economic Review
Abstract:
Integration of global financial markets was supposed to lead to greater financial stability, as risks were spread around the world. The financial crisis has thrown doubt on this conclusion. A failure in one part of the global economic system caused a global "meltdown." The recent crisis has shown that in the absence of appropriate government intervention, privately profitable transactions may lead to systemic risk. This paper provides a general analytic framework within which we can analyze the optimal degree (and form) of financial integration. Within this general framework, full integration is not in general optimal. Indeed, faced with a choice between two polar regimes, full integration or autarky, in the simplified model autarky may be superior.
Subject(s):
Economics
Publisher DOI:
http://dx.doi.org/10.1257/aer.100.2.388
Item views:
1621
Metadata:
text | xml
Suggested Citation:
Joseph E. Stiglitz, 2010, Risk and Global Economic Architecture: Why Full Financial Integration May Be Undesirable, Columbia University Academic Commons, http://hdl.handle.net/10022/AC:P:19506.

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