ABSTRACT
A gradual decline to a lower price would alter some aspects of the international financial system but would leave its framework intact. A low oil price would reduce the demand for dollars in international transactions. A sudden, large fall in the price of oil would cause dramatic changes in international financial flows to which the international financial system would have difficulty in adjusting. The international financial system has already been through the first round of a crisis. Some proposals have been made for improving the quality of international bank portfolios, but they have received little official support. The scale and duration of the disruption in international financial markets would determine the extent to which a large fall in the price of oil has an adverse impact on economic activity. The international banks are, in general, either domestic banks or the subsidiaries of domestic banks.
