This paper reviews the impact of financial globalisation on credit dynamics. In particular, it argues that financial globalisation fundamentally alters credit demand and credit supply, since borrowers and lenders have foreign options as well as domestic options in terms of the selection of projects and funding sources. The rapid accumulation of large cross-border debt positions was a central feature in the boom phase of the European credit cycle during 2003–8 and has influenced the nature of the post-2008 financial crisis. Finally, the paper considers the range of policy reforms needed to improve macro-financial stability under international financial integration.
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