I believe in the idea that all nations gain from trade, including trade in financial assets. Notwithstanding possible imperfections in the financial markets, international capital market integration can yield considerable benefits. However, it is important to stress that without flexible markets, countries will not be able to reap the full benefits of globalisation. The painful lesson to be learned from economic theory and historical experience is that these four elements cannot co-exist, and that at least one will have to give way. This is of course one of the major insights which Robert Mundell, this year's Nobel prize winner, taught us more than 30 years ago.
Globalisation also implies that certain types of policy measures become less effective.
This refers in particular to all regulations which can easily be circumvented by the private sector by redirecting business activities to foreign countries or by transferring funds abroad. The Eurosystem took this into account in elaborating its operational framework, which was set up in line with the market principle. For example, there is no facility which explicitly or implicitly subsidises counterparties. Moreover, the remuneration of reserve requirements eliminates the danger that domestic residents will hold deposits outside the euro area in order to avoid the costs related to non-remuneration. However, globalisation sometimes makes it more difficult to analyse monetary policy indicators and to investigate and understand the transmission mechanism.