For several decades, trade deepening has helped catalyze catch-up in per capita incomes across countries and a large reduction in global poverty, while in advanced economies, low-income consumers have benefited disproportionately through lower prices. The benefits of globalization propagate through multiple channels the adverse consequences of GEF would be felt in many areas as well. This Staff Discussion Note explores the potential economic ramifications of a policy-driven reversal of global economic integration, a multidimensional process that the authors refer to as geoeconomic fragmentation (GEF). The COVID-19 pandemic and Russia’s invasion of Ukraine have further tested international relations and increased skepticism about the benefits of globalization. The post-GFC era has seen a leveling-off of global flows of goods and capital, and a surge in trade restrictions.

A shallow and uneven recovery from the global financial crisis (GFC) was followed by Brexit, U.S.-China trade tensions, and a growing number of military conflicts. After decades of increasing global economic integration, the world is facing the risk of fragmentation.

System shock 1 data fragment 3