Financial Globalization And Monetary Policy

This paper reviews the available evidence and previous research on potential effects of financial globalization, that is, the international integration of financial markets. In particular, the author addressed the questions: Has financial globalization materially increased the influence of external developments on domestic monetary conditions? And, has it reduced the influence of central banks over financial and economic conditions in their own country? They find that central banks with floating currencies retain the ability to independently determine short-term interest rates and thus influence broader financial conditions and macroeconomic performance in their economies.