On the global financial market integration 'swoosh' and the trilemma

摘要

We propose a measure of financial market integration based on a factor model of equity returns computed back to the first era of financial globalization for 17 countries. Global financial integration follows a "swoosh" shape - high pre-1913, higher post-1990, low in the interwar period - rather than other shapes hypothesized in earlier literature. We find no evidence of financial globalization reversing since the Great Recession, as claimed in other recent studies. We use our measure to revisit the debate on whether the classic monetary policy trilemma has recently morphed into a dilemma and find no evidence for such change. (C) 2019 Elsevier Ltd. All rights reserved.