ABSTRACT
The explosive growth of computer networks and of new forms of financial products, such as derivatives, is leading to increased couplings among previously dispersed markets. This increased fluidity raises questions about the stability and efficiency of the international financial system. On the one hand, it is quite apparent that increased overall connectivity among markets allows transactions that were not previously possible, increasing the net wealth of people and leading to more efficient markets. But at the same time, this implies that a transition is taking place, from a more static scenario in which isolated markets can be considered in equilibrium on their own, to a global economy that knows of no geographical borders. One may wonder about the nature of this transition, i.e. is it gradual in the sense of a smooth change in prices, or punctuated by abrupt changes in the value of certain commodities, cascading bankruptcies and market crashes?
