for greater co - operation is the lessons that emerge from the build - up of structural imbalances in the euro area before the crisis. a corollary of monetary integration is the elimination of exchange rate risk, which reduces transaction costs and increases the elasticity of substitution between financial assets issued by member states of the monetary union. in the euro area, financial linkages were greatly facilitated by the introduction of the single currency. a distinct feature of these linkages was the build - up of current account imbalances. deficits accumulated in the periphery were mirrored by a build - up of surpluses in core countries. the financial account counterpart involved significant capital flows from the core to the periphery, with its counterpart in the accumulation of debt – whether public or private. these flows were directed 2 / 3 bis central bankers'speeches mainly to non - tradable sectors ( public consumption and residential investment ). the crisis brought with it a “ sudden stop ” to these capital flows, resulting in sharp adjustment, largely in deficit countries8. subsequently, much has been done to address what we now recognise as deficiencies in the design of the economic and monetary union – the european financial stability facility and subsequently the european stability mechanism ; the banking union and its components. but more importantly for imbalances, the surveillance framework of eu member states has been strengthened through new rules and procedures, among them, the macroeconomic imbalances procedure. in short, co - operation is important also at the regional level. these changes are also supporting the reform process in greece. conclusions the course and magnitude of global financial flows and our own perceptions of financial openness are being continually reshaped in the 21st century. a period of relative abundance was rapidly brought to a halt with the international financial crisis of 2008. our experience with free capital flows can help us ensure that in the future we harness their benefits and multilateral cooperation is key to achieving that. 1 ( 1 ) see obstfeld, maurice. risk - taking, global diversification, and growth. no. w4093. national bureau of economic research, 1992, van wincoop, eric. “ how big are potential welfare gains from international risksharing?. ” journal of international economics 47, no. 1 ( 1999 ) : 109 – 135 and agenor, pierre richard. “ benefits and costs of international financial integration : theory and facts. ” the world economy 26, no. 8 ( 2003 ) : 1089 – 1118.

2 ( 2 ) see kose, m. ayhan, eswar s. prasad, and ashley d. taylor. “ thresholds in the process of international financial integration. ” journal of international money and finance 30, no. 1 ( 2011 ) : 147 – 179. 3 ( 3 ) see for instance, kose, m. ayhan, eswar prasad, kenneth rogoff, and shang - jin wei. “ financial globalization : a reappraisal. ” imf staff papers 56, no. 1 ( 2009 ) : 8 - 62 and prasad, eswar s., and raghuram g. rajan. “ a pragmatic approach to capital account liberalization. ” the journal of economic perspectives 22, no. 3 ( 2008 ) : 149 – 172. 4 ( 4 ) see rogoff, mr kenneth, mr eswar prasad, mr m. ayhan kose, and shang - jin wei. effects on financial globalization on developing countries : some empirical evidence. no. 220. international monetary fund, 2004. 5 ( 5 ) ostry, jonathan d. “ managing capital flows : what tools to use?. ” asian development review 29, no. 1 ( 2012 ) : 82. 6 ( 6 ) see beck, r., beirne, j., paterno, f., peeters, j., ramos - tallada, j., rebillard, c., reinhardt, d., weissenseel, l. and worz, j., 2015. the side effects of national financial sector policies : framing the debate on financial protectionism. ecb occasional paper 166. 7 ( 7 ) see fratzscher marcel, marco lo duca and rolad straub. “ a global monetary tsunami? on the spillovers of us quantitative easing ”. cepr discussion paper no 9195, october 2012, miranda - agrippino, silvia, and helene rey. world asset markets and the global financial cycle. no. w21722. national bureau of economic research, 2015 and lim, jamus jerome, sanket mohapatra, and marc stocker. “ tinker, taper, qe, bye? the effect of quantitative easing on financial flows to developing countries. ” world bank policy research working paper 6820 ( 2014 ). 8 ( 8 ) see lane, philip r. “ capital flows in the euro