@techreport{NBERw15718,
 title = "Risk and Global Economic Architecture: Why Full Financial Integration May Be Undesirable",
 author = "Joseph E. Stiglitz",
 institution = "National Bureau of Economic Research",
 type = "Working Paper",
 series = "Working Paper Series",
 number = "15718",
 year = "2010",
 month = "February",
 URL = "http://www.nber.org/papers/w15718",
 abstract = {This paper provides a general framework for analyzing the optimal degree and form of financial integration.  Full integration is not in general optimal:   faced with a choice between two polar regimes, full integration or autarky, autarky may be superior.  The intuition is simple: if underlying technologies are not convex, then risk-sharing can lower expected utility.  The simplistic models arguing for financial integration typically employed in economics assume convexity; but the world is rife with non-convexities, e.g. associated with bankruptcy.  The architecture of the credit market can, for instance, affect the likelihood of a bankruptcy cascade, “contagion,” and systemic risk.},
}