No Man Is an Island

Abstract

And therefore never send to know / for whom the bell tolls; / it tolls for thee.¹ One of the clearest lessons of the crisis is that the global economy is much more closely interconnected than it used to be, and it is becoming ever more so. This is not news: Thomas Friedman made the point quite effectively in his 2005 best-selling book The World is Flat; but the financial crisis brought home to all of us what this lesson really means. Global financial markets are so intimately linked by a complex web of transactions that tensions in one country or asset market can have repercussions which are both powerful and nearly impossible to predict across countries and asset markets. And the global economy is so interconnected that growth trends and policy actions in some countries can have potent and unexpected reverberations on economic activity and macroeconomic stability across the globe.