Financial Globalization

Financial globalization refers to the ongoing integration of once poorly connected national financial markets. A key aspect of globalization is a decline in financial home bias— the tendency for domestic saving to be invested predominantly at home, with domestic portfolios tilted heavily toward home-country assets. Recent years have in fact seen a pronounced decline in home bias, with a record fraction of global saving going to cross-border investments. Indeed, in 2005 and 2006, the share o...