The founding fathers of Bretton Woods institutions shared a common vision: in order to prevent a new phase of economic instability they intended to create a rule- based multilateral framework, imposing clear obligations on the contracting parties and prohibiting the adoption of protectionist and beggar- thy- neighbour policies. But the post- war economic framework also included clear rules, directed at preventing large capital flow movements. Henceforth, instability was mostly absent, as financial markets remained local. This common vision, however, began to recede 40 years ago when a worldwide liberalization process was initiated and it radically transformed global financial markets. The Keynesian idea of maintaining financial markets as local and stable suddenly vanished, and mainstream economics embraced financial globalization. Thereafter, foreigners would become active players in key financial markets almost everywhere, and local investors would be entitled to invest abroad. In theory, financial integration has been sought as beneficial for both developing countries and EMEs (particularly for those short of funds) and global investors alike (as they would be obtaining higher yields by arbitrating on a global scale). In practice, though, financial globalization pushed emerging markets towards increasing macro volatility and greater financial fragility. Underperformance, certainly, was not necessarily correlated with macro negligence or with the presence of improper institutions (as mainstream advisers have been encouraging in the recent past), but particularly with their excessive exposition to unfettered capital flows (as they actually recognize).

Economic Policy in a World of Pyramids and Triangles

In order to analyse the vast challenges introduced by globalization on open (but small) economies, we have introduced a series of canonical models describing the different (but highly interconnected) constraints binding on the macro, financial and political fronts. Certainly, any of these models cannot describe in detail all the challenges being face by each of the analysed countries, although they help us a lot. Henceforth, and beyond specific geometrical shapes and passionate discussions, we found all of the trilemmas as useful models to describe the basic set of constraints observed in the journey to globalization. In particular, this set might be helpful for policymakers at LDCs and EMEs to realize the vast set of constraints imposed by an excessive or premature globalization. As the previous chapters have shown, internationalizing (opening) the economy is a difficult task, but if properly managed it can bring more benefits than costs.