this can in turn leave countries vulnerable to sudden stops once optimism fades due to local or global shocks. indeed financial cycles tend to have a global component, and hence the discussion about financial globalisation has evolved into one about the “ global financial cycle ”, which is driven by us monetary policy. the assumption is that non - us central banks have lost their ability to influence domestic long - term interest rates, even in the presence of flexible exchange rates, due to the existence of “ us - driven ” global financial cycles. 6 as a result, the classic trilemma 7 may have morphed into a dilemma between financial openness and monetary policy autonomy. in addition to risks related to unsustainable lending booms, which can be fueled by capital flows, policy makers and academics recently also stressed risks stemming from disruptive capital outflows, which can endanger financial stability, for example if large amounts of bank deposits 1 / 4 bis central bankers'speeches are pulled out of a country. in the context of this debate on financial integration, academic papers on the welfare optimality of taxation of international capital flows have also thrived since the crisis. 8 moreover, the standard international policy consensus on financial globalization has been shattered by the crisis. for example, the imf adopted in 2012 an institutional view that said temporary and targeted capital flow management measures can be useful in certain circumstances, i. e. when the room for manoeuvre for macroeconomic adjustment is limited. 9 the fund is now reviewing this institutional view. it is expected that the effectiveness of capital flow management measures, which have been recently used in emerging and some advanced economies, will be assessed in a balanced way, taking into account all intended and unintended effects, which such measures may generate. in parallel, the oecd is reviewing its code of liberalization of capital movements. with the review, the oecd aims to facilitate collective action by boosting transparency and shared understandings on good practices related to managing and liberalising capital flows. a particular area of interest is the treatment of capital flow measures that are used as macro - prudential measures. for policy makers, this is important since at times there may be tradeoffs between financial integration and financial stability. ii. effective financial risk sharing rests on the soundness of institutions and policy rules as part of this policy discussion, i would like to underline that openness to international capital flows should continue to help diversify country - specific shocks. this would

journal. 6 see helene rey ( 2013 ), “ dilemma not trilemma : the global financial cycle and monetary policy independence ”. in : jackson hole economic symposium 2013. 7 according to the trilemma, in a financially integrated world, fixed exchange rates export the monetary policy of the centre country to the periphery. the corollary is that if there are free capital flows, it is possible to have independent monetary policies only by having the exchange rate float ; and conversely, that floating exchange rates enable monetary policy independence ( see e. g. obstfeld and taylor ( 2004 ) ). 8 see e. g. olivier jeanne and anton korinek ( 2010 ) “ excessive volatility in capital flows : a pigouvian taxation approach ”, american economic review papers & proceedings 100 ( 2 ), pp. 403 - 407 and emmanuel farhi and ivan werning ( 2014 ), “ dilemma not trilemma? capital controls and exchange rates with volatile capital flows, ” imf economic review 62, pp. 569 - 605. 9 under the imf new institutional view, cfms should not substitute for warranted macroeconomic adjustments. circumstances which allow for cfms on capital inflows include for example a situation in which the economy is overheating, the exchange rate is overvalued and reserves are at adequate levels. similarly, cfms could be applied on capital outflows if the economy is stagnating, fx exposures are high, and reserve levels are inadequate. 10 in many studies gains are of second order of magnitude as financial integration enables a reduction of consumption volatility but does not affect output ( see nicolas coeurdacier, helene rey and pablo winant, 2015 “ financial integration and growth in a risky world ”, nber working paper, no. 21817 ). 11 one estimate suggests that the standard deviation of income growth uncertainty is reduced through financial markets by as much as 35 % across u. s. states ( see stefano g. athanasoulis and eric van wincoop, ( 2001 ), “ risk sharing within the united states : what do financial markets and fiscal federalism accomplish?, ” the review of economics and statistics, 83 ( 4 ), pp. 688 - 698. according to a recent imf paper, cross - country risk sharing in the euro area is not only more limited ( roughly half that seen in existing federations ), but also falls sharply