ABSTRACT. Hawkins claims that financial innovation and globalization have led most central banks to operate monetary policy by influencing conditions in the market for bank reserves. Moreno and Villar contend that foreign bank entry may enhance financial stability by permitting greater diversification of exposures and by improving risk management. Mihaljek says that if foreign exchange earnings from oil exports are converted into domestic currency and spent on non-tradables, this can lead to exchange rate appreciation and weaken a country's export competitiveness. Andersen and Moreno state that even with a systematic examination of the evidence, it is difficult to establish a robust relationship between financial integration and growth.