Economic Interdependence and Its Role in the Propagation of Financial Crises: A Theoretica Synthesis

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Abstract

The intensification of global economic interdependence has accelerated the spread of financial crises among nations. Our goal is to identify and categorize the primary channels through which economic interdependence drives financial contagion between countries. To achieve this, we conducted a theoretical review that integrates existing literature on financial and commercial transmission mechanisms. The findings highlight that the most relevant channels are international trade, foreign direct investment, integrated financial markets, global supply chains, and coordinated economic policies, each with varying impacts depending on the economic context. The research highlights that while economic interdependence can foster growth, it simultaneously heightens the vulnerability of economies to financial crises. This study emphasizes the urgency of formulating stronger global economic policies to mitigate these risks and suggests specific areas for future research, such as evaluating the effectiveness of policies in different regions.