In new research, Bruno Pellegrino and Damien Capelle find that while global capital markets have grown dramatically over the past five decades and reached new jurisdictions, the uneven pace of financial liberalization has failed to reallocate capital to lower-income countries, reduced world GDP by 5.9%, and increased inequality between rich and poor countries.

Recent events have reignited concerns about the financial stability implications of monetary policy. We show empirically that monetary tightening exacerbates financial stress after supply shocks, thro...