Abstract
This article examines the degree of fragmentation in various markets and classifies its possible causes. The definitions of fragmentation presented: price measures – differences in prices for equivalent assets in different countries; and quantitative measures – deviations from benchmarks in international investment positions. The costs and benefits of fragmentation examined from a financial stability perspective, drawing on the experience of the securities market, international banking and asset prices. It is concluded that the fragmentation of financial markets and financial stability complement each other. In some cases, some degree of fragmentation actually contributes to improved financial stability. However, assessing the trade-offs between market fragmentation and financial stability requires identifying the causes of fragmentation and conducting a thorough cost-benefit analysis.
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