In these last decades, finance has become truly global. This has a lot of benefits. But, it is also important to understand the drawbacks of international capital flows.

This video explores the following questions: have countries been right to open the door to international investors? or was it a mistake? And, if it was a mistake, what can they do to limit harmful effects of financial globalization?

This video has been inspired by work from economists at the bank for international settlements such as Claudio Borio as well as the work on the global financial cycle by Helene Rey.

The global financial cycle describes how asset prices worldwide move in tandem along with gross capital flows and monetary policy easing by the U.S. Federal Reserve. Central banks of small other countries will have no other option then to follow the U.S. central bank with their interest rates. This is how the classical trilemma turns into a dilemma.

Want to know more, I'm also using this video in a course that I am teaching at the University of Groningen called International Financial Markets that I teach with prof. Dirk Bezemer.

Also, check out the script for this video here: https://www.moneymacro.rocks/2021-02-04-global-financial-cycle/

Narrated and produced by Dr. Joeri Schasfoort (University of Cape Town)
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