26th Feb 2014 12:09
LONDON (Alliance News) - Greater the openness faster the convergence towards the productivity frontier in the UK, Bank of England Monetary Policy Committee member Ben Broadbent said Wednesday.
In a speech to the Institute of Economic Affairs, Broadbent said open capital markets allow countries to tap sources of finance other than their own saving. So to the extent productivity is low because an economy is under-capitalized, open markets should help, he added.
Broadbent noted that British banks lost money on property related loans in Ireland and the US during crisis. "Thanks to the deep integration of international banks and capital markets, problems that arise in one part of the world can rapidly arrive on our own shores," said Broadbent.
"It would be a big mistake, however, to imagine that the system brings us only problems," he added. Integration allows the U..K. to diversify its own domestic risks too.
"I think that receding near-term risk in the euro area has been a significant contributor to our own economic recovery," the policymaker said.
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