The Butterfly Defect: Why globalization creates systemic risks and what to do about it

Ian Goldin

Journal of Risk Management in Financial Institutions, 2014, vol. 7, issue 4, 325-327

Abstract: Global interconnectedness can yield significant benefits, but can also create new systemic risks. In a globalised world, systemic risk creates vulnerabilities such that a single node in a network has the capacity to disrupt the entire global system. Such vulnerability was illustrated during the 2008 financial crisis, when the collapse of a single financial institution had reverberating consequences across the world's financial system. Six policy steps are proposed to address systemic risk inherent in an interconnected world.

Keywords: globalisation; systemic risk; financial crises; financial networks (search for similar items in EconPapers)
JEL-codes: E5 G2 (search for similar items in EconPapers)
Date: 2014
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