Krzysztof Rybiński: Globalisation and its implications for monetary policy
Address by Mr Krzysztof Rybiński, Deputy President of the National Bank of Poland, at a series of
seminars by the Centre for European Regional and Local Studies and the UNESCO Chair, Warsaw
University, Warsaw, 6 April 2006.
* * *
Ladies and Gentlemen,
Globalisation is a term used frequently in the economic debate nowadays, and it would be difficult to
find an area of economic research that is "globalisation-free". However, its meaning is so broad, that
when globalisation is referred to in a discussion, various people understand various things. For this
very reason, a discussion on globalisation and the monetary policy should commence with an attempt
to define the term. One of the definitions of globalisation is provided by the International Monetary
Fund (IMF)1, where it is construed as "the growing interdependence (integration) of national
economies, in particular as a result of the growing international trade and financial flows". Moreover,
an element of globalisation that is worth mentioning is the fast flow of information and knowledge,
which is the driving force behind globalisation processes. One should keep in mind that globalisation is
not a completely new phenomenon2. In view of the existence of political barriers to international trade,
the flow of capital and goods was equally as possible one hundred years ago as it is today. It goes
without saying, however, that as a result of the rapid development of technology, especially in the ICT
area, which drastically lowered the cost of the said exchange, the international integration of trade,
investment, financial and other services is now more advanced than it has ever been before.
The Economic Policy Committee of the European Union3 points out four factors that have lead to the
rapid development of globalisation over the past years:
• multilateral trade liberalisation; the average customs duty has been lowered by ca. 30%
• successful economic reforms in many developing countries, especially in China and India
• the technological advancement, especially in the ICT sector and transportation, which has
significantly lowered the cost of trade. To give you and example, fees for sea, land and air
transportation, telephone calls and satellite calls went down by 21%, 30%, 95% and 88%,
respectively.
• the technological advancement has blurred the borderline between what can and what
cannot become subject to international trade.
Globalisation may create new macroeconomic interdependences to replace the traditional ones that
we know from the books on economics. The majority of economists, politicians and investors may still
not quite keep at pace with the "seismic changes" that take place in the economy4. However, if we
really are witnesses to "seismic changes" in the economy, it may be worthwhile to have a closer look
and think about their meaning.
Globalisation and its impact on the economy may be viewed from different perspectives. Today I
would like us to look at globalisation from the perspective of a central bank, taking into consideration
the objective of the central bank, its ability to contribute to the shape of the economy and the
instruments that a central bank has at its disposal. To start with, let us consider what channels there
are through which globalisation may impact the monetary policy and the central bank.
Firstly, globalisation - through shaping real economic processes abroad, its influence on the global
business cycle and commodity prices on global markets - influences the external environment of the
national economy, which is monitored by the central bank and in which the central bank operates.
Today, a central bank in a small open market economy, which would wish to turn a blind eye on the
developments in the external environment and focus solely on the developments in the national
economy, is doomed to failure.
Secondly, globalisation changes the wage and price setting mechanisms in the national economy,
which have an impact on the domestic inflation. Globalisation (the growing openness of economies) -
through the growing share of countries with low manufacturing costs in the global output - increases
the margin and wage pressures, in consequence lowering the inflation. At the same time, globalisation
drives up commodity prices, and thus contributes to - at least temporarily - increased inflation.
Thirdly, increased international migration of workforce changes the situation on local labour markets.
Where the workforce outflows, the wage pressures increase; in the case of an inflow of workforce, the
wage pressures go down.
Fourthly, globalisation changes the functioning of financial markets and increases the uncertainty as to
the impact of decisions made by the central bank on these markets and on macroeconomic variables.
Fifthly, globalisation has an impact on the central bank's perception of the economic environment and
the monetary policy strategy it applies. A fast transfer of the economic know-how (flow of the economic
knowledge and analytical methods) changes the methods of economic analysis by central bank
economists, as well as the way decisions regarding the monetary policy are made.
Sixthly, globalisation increases the risk of speculative bubbles on the assets market.
Let us have a step-by-step look at these channels of influence of globalisation on the monetary policy.
Re 1)
The growing share of international trade in the global output as well as the increasing international
capital flows cause a situation, where the growth rate of a national economy depends increasingly on
the developments of the global economy. To illustrate the impact of globalisation on the economic
prospects, attention should be drawn to the hot topic in the macroeconomic policy, namely the
problem of global imbalances.
To give you some facts, the US current account deficit had been growing gradually over the past years
to exceed USD 800 billion, i.e. 6.5% of the U.S. GDP, last year. This deficit, which represents import of
savings from the rest of the world to the USA, is financed by the Asian central banks, for example the
Peoples Bank of China, and by oil-exporting countries. The available forecasts show that the deficit
will continue to grow. An animated debate is currently underway to determine whether this is a steady
situation that simply reflects the new principles in the global economy5, or whether this trend is bound
to stop and reverse sooner or later, which may entail a significant increase in the US long-term interest
rates, a strong depreciation of the US dollar and a serious slowdown in the global economic growth.
The majority of empirical and theoretical studies indicates a growing probability of the latter scenario,
especially if no due steps are taken in many countries. These steps include the necessity to accelerate
the potential GDP growth in the European Union and Japan through reforms of the labour market and
the product market, increasing savings in the US by curbing the budget deficit, and reforms of the
financial sector in China and subsequent gradual floating of the renminbi exchange rate.
The central bank must consider possible scenarios of developments in the global economy and
possible adjustments of global imbalances, as they significantly impact the perspectives of a national
economy, and so the monetary policy pursued. Moreover, the central bank, as an institution that
manages foreign exchange reserves, must monitor changes on the global financial market, as these
changes and investment decisions made by the central bank influence the return on foreign exchange
reserves.
Re 2)
Globalisation changes the wage and price setting mechanisms in a domestic economy. This ensues
from the increased international competition and the growing role of outsourcing and offshoring.
Offshoring consists in transferring of manufacturing, services or orders abroad, where such transfer
may be made within a single company or to another company. Outsourcing consists in renouncing
manufacturing or services in a given company and obtaining such goods or services from another
company that may be located in the same or another country.
In the past, the major part of the chain of manufacturing and services used to be located in a given
country, which meant that, from the monetary policy perspective, the domestic demand was of great
importance, and in particular - the size of output in relation to its potential level i.e. the so-called output
gap. The impact of the global economy, on the other hand, was observed mainly due to changes in
the terms-of-trade i.e. the ratio of export to import prices, which in turn was affected by, among others,
commodity prices and changes in external demand. Nowadays, inter alia as a result of globalisation of
production and services, the role of the domestic output gap in explaining inflation has decreased
significantly, as shown by the BIS research6. As in the case of the model applied by the NBP in
forecasting inflation, the role of the output gap as a factor that determines inflation is much smaller
than it used to be.
In old books on macroeconomics inflation is treated largely as a local development, i.e. dependent in a
great measure on domestic factors (such as the domestic output gap and inflation expectations).
Today, inflation is becoming increasingly less local, and in turn, becomes more and more dependent
on global factors, i.e. the relationship between global demand to global supply. Research that
analysed the course of inflation in 22 OECD countries between 1960 and 2003 has shown that 70% of
inflation volatility may be explained by a common factor7. This global, common factor explains not only
the change in the inflation trend (the increasing inflation between 1960 and 1980 and its subsequent
decrease), but also inflation fluctuation over a business cycle. The research has also shown that,
where domestic inflation deviates from the "global" inflation, it exhibits a "global-inflation-reverting"
tendency. As a consequence, modelling and forecasting of domestic inflation may be improved
significantly by taking into account the "global inflation".
The fast-progressing globalisation is closely related to offshoring and outsourcing, whose scope is also
growing. Unfortunately there is not much hard data that would allow for assessment of the scale of the
phenomenon. Offshoring analysis is available only for selected countries and covers only selected
industries. However, the growing scale of the phenomenon is reflected by data on global trade in
goods and services and on foreign direct investment. Over the past 15 years, the shares of individual
regions in the global trade have changed significantly, whereby the decreasing share of the EU is
accompanied by increasing shares of the developing countries, including the Asian countries. Globally,
foreign trade expressed as percentage of the GDP increased from the average 19% of the GDP
between 1980 and 1989 up to 25% between 2000 and 2004.
Table 1. Shares of individual regions in global trade
% Total 1990 1995 2002
Developed countries 72 67 63
US 12 12 11
UE15 44 39 38
Developing countries 28 33 37
Asia 13 19 20
Source: IMF Direction of Trade Statistics
Global capital flows keep growing even more dynamically, whereby the share of the global FDI in the
global GDP increased from 8% in 1989 to 22.1% in 2003, and foreign assets expressed as percentage
of the GDP increased from 62.6% of the GDP to 186.1% of the GDP, respectively.
As evidenced, the role of trade and financial links between enterprises in various countries has
become more important over recent years. Previously, in response to growing fuel prices or costs of
living, trade unions demanded wage increases, which triggered the so-called second-round effects
and central banks had to increase interest rates to mitigate inflation. Nowadays, trade unions must
take into account the fact that in the case of wage increases, production and services may be
transferred to countries with lower manufacturing costs.
In EU Member States, between 2002 and November 2005, 202 cases of the restructuring of
companies related to offshoring were publicly announced, which resulted in the transfer of nearly one
hundred thousand jobs. Over that period, offshoring stood behind nearly six per cent of all cases of
publicly announced restructurings of companies in the EU. So far, the scale of the phenomenon has
not been large. However, offshoring as a strategy of increasing competitiveness is becoming more and
more common and includes not only the manufacturing of products but also - increasingly - services.
Table 2. Offshoring in EU member states
Countries to which job transfer Number of jobs liquidated in the Number of jobs liquidated in the
took place EU between 2002 and 2003 EU between January and
due to transfer of jobs November 2005 due to transfer
of jobs
China 3361 3077
India 9458 5470
Asian countries 3786 3271
Czech Republic 780 3890
Hungary 1110 772
Poland 120 2676
33151 31942
Source: European Restructuring Monitor 8, own calculations
Numerous analyses show that the process of offshoring is bound to grow and increasingly affect
services9. For example, between 1980 and 2002 the trade in goods and services grew at 6.9%.
According to forecasts by McKinsey Global Institute, off-shoring of services to countries with low
manufacturing costs in the years 2003 - 2008 is going to grow at a rate of 30% annually. In 2003, the
global trade in services was ca. USD 1.7 trillion, of which a mere 3% resulted from offshoring to low
cost countries. It is expected that in 2008 the global trade in services will amount to ca. USD 2.4
trillion, of which 10% will represent offshoring of business and ICT processes to low cost countries. To
compare, the travel industry represents 30% of trade in services in the OECD data, whereby
transportation - 20%. Based upon an analysis of eight representative sectors, McKinsey Global
Institute estimated that in 2003, 18.3 million jobs in services could have been transferred to other
locations (this applies mainly to sectors such as IT - 2.8 million, banking - 3.3 million, insurance - 2.3
million, healthcare - 4.6 million and retail sales - 4.3 million). Extrapolating the results for the global
economy, it may be estimated that in 2008 ca. 160 million jobs in services, i.e. 11% of the global
employment in services estimated at 1.46 billion, may theoretically be performed at a distance from
the customer.
From the monetary policy perspective, it is important to properly understand the impact of offshoring
on the functioning of local labour markets, which - as a result of ever greater opening of the economies
- have merged into one global labour market. Before the fall of socialism in European countries, the
then global market amounted to ca. one billion people. Nowadays, i.e. after China and India have
joined the global economy, the market comprises ca. four billion people. This brings about a situation
where jobs are being transferred to new, more attractive locations and people increasingly move in
search for better-paid jobs. The largest migration known as "the great migration" is taking place in
China10. According to estimates, over the next 10 years ca. 200 million Chinese will migrate from
villages to cities and find employment in industry - to a large extent in export-oriented industry sectors
- and in services. This means that over the next 10 years, every month one to two million Chinese on
average will give up their low-paid, low-productivity jobs in agriculture and take up better-paid and
more productive work in other sectors. The monetary policy must take into account the impact that this
process is going to have on the Chinese economy and on economies of other countries.
As opposed to trade and capital, the flow of people within EU Member States was stable. The annual
net migration to EU-15 remained at a level of less than 5 people per 1000 inhabitants over the past 40
years. Approximately 9% of EU population was born in other countries, whilst in the USA this figure
was 12% and ca. 20% in Canada and Australia. However, following the EU enlargement, where 10
new members joined the structures, our part of the world has also seen an increase in migration,
which is shown in Table 3 below. In some cases, a significant part of the domestic work force took up
employment in other countries. The estimates show that, for example, ca. 5% of Lithuanians took up
employment in countries that opened their labour markets for the new EU Member States following 1
May 2004.
A conclusion may be drawn that opening of the low cost economies, especially of the Chinese
economy, and the increasing international competition on the market of goods and services related
thereto, changes the methods of setting prices by enterprises and determining wages on the labour
market. Enterprises are increasingly becoming price-takers, and thus even in a situation of rising costs
of manufacturing, they are unable to lift prices and shift the growing costs onto the customer. Similar is
true for wages, whose level is determined on the increasingly global labour market. Research on the
manufacturing sector in EU Members States (for the years 1988 - 2000) has shown that the increase
in the openness of that sector (growing import) caused a fall of prices by 2.3%, a growth in productivity
by 11% and a drop in margins by 1.6%. Altogether, it may explain the inflation fall by 0.14% in annual
terms over that period11. When looking at the price processes from the microeconomic perspective,
vital structural changes can be observed, which bring about lower inflation.
Table 3. Number of work permits in the UK, Ireland and Sweden issued to citizens of new
Member States following the EU accession
In thousands
In % of
workforce †
UK * Ireland** Sweden*** Total
Lithuania 44.72 26.37 0.37 71.46 4.4
Latvia 23.03 12.94 0.16 36.14 3.2
Estonia 4.68 3.39 0.36 8.43 1.3
Poland 204.90 70.14 2.16 277.20 1.6
Czech
Republic 20.01 6.39 0.07 26.47 0.5
Hungary 10.35 3.83 0.20 14.37 0.3
Slovakia 36.36 10.93 0.09 47.38 1.8
Analysts also point out that the dynamically growing Chinese economy, which uses more and more
commodities, contributes to a significant increase in their prices, and may potentially drive up inflation.
However, considering the increased competitive pressure, the possibility of shifting higher cost of
commodities (e.g. oil) onto the final prices is limited12. In addition, in view of fierce competition on the
labour market and the changes referred to above, the risk of growing wage demands is limited, and so
are the so-called second-round effects.
Re 3)
Over the past three decades, the financial sector has become highly international. Financial services,
provided under strictly regulated, separate, domestic financial systems in the past, are now provided
under ever more open, competitive and global system. One of the measures of globalisation in the
financial services sector is the growing volume of cross-border capital flows. Cross-border transactions
in the bonds and shares segment are now exceeding 90 trillion (thousand billion) US dollars per
annum, which translates into USD 250 billion daily13. Moreover, the size of financial markets and their
meaning to the global economy becomes ever greater. According to McKinsey Global Institute14, the
total value of global financial assets is now USD 118 trillion, whilst as far back as in 1980 they were
only 12 trillion. The increase in the volume of financial assets is progressing at a higher rate than that
of output, and has now reached a threefold of the global GDP, whilst back in 1980 it was
approximately equal to the world output. Additionally, the fastest growing segment of the financial
market is the segment of private debt securities. What is more, international issues of these securities
grow at a higher rate than domestic issues, which means that companies increasingly finance their
activities from funds raised abroad. Additionally, an important feature of development of the financial
market is the gradual fall in significance of intermediation of the banking sector with a simultaneous
increase of significance of the market intermediation15. As a consequence, the central bank's channels
of influence on the economy are changing. In the past the bank loan channel was deemed more
important; it is now loosing its significance in relative terms.
Until recently, the investment rate in the economy was to a large extent dependent on the domestic
savings rate, which by the way was contradictory to one of the fundamental assumptions of some
economic models of the full integration of capital markets. The economy was featured by the so-called
home bias i.e. greater inclination of domestic investors to invest in domestic assets rather than in
foreign assets16. The latest research17 suggests that home bias over the past years could have
dropped significantly, at least in the OECD countries. The decrease may be attributed to the very
growth of cross-border capital flows. What does that mean to the monetary policy? If domestic and
foreign financial assets are treated more and more as perfect substitutes, domestic interest rates,
especially mid- an long-term ones, are determined on the global market, and thus the influence of
particular central banks on their level is weakened. This phenomenon is already observed in the USA.
Although the key interest rate of the central bank has been raised from 1.00% in 2004 to 4.75% at
present (i.e. by 3.75 percentage points), long-term interest rates, which are more important from the
aggregate demand perspective, have remained roughly unchanged18. As a result, the effect of
tightening the monetary policy on the aggregate demand has been significantly contained due to lack
of response from long-term interest rates.
In the world of global financial markets nobody seems to be surprised by the fact that during the
session of the Federal Open Market Committee (FOMC19) of the American Federal Reserve, the eyes
of the entire financial market are fixed on its Chairman. Why is that? Decisions made by the FOMC in
Washington are equally as important for investors in New York as those in London, Tokyo, Rio de
Janeiro, Shanghai or even Warsaw. Not only do the FOMC decisions influence US economy, but also
- via the financial markets channel - the entire global economy. An unexpected increase in interest
rates in the USA may bring about a sudden outflow of capital from the emerging markets, and thus
weaken the currencies of those countries and increase their bond yields.
Some economists20 make the point that an important aspect of the growing internationalisation of
financial markets is increased discipline, which is extorted by investors on governments and central
banks in individual countries. According to this hypothesis, the financial markets, through their
continuous valuation of securities, duly reward good and punish bad economic policies. However, the
empirical results do not provide hard evidence to support the thesis on fiscal policy discipline. It may
be stated, on the other hand, that financial globalisation may have contributed to the discipline of
central banks and to "forcing" them to conduct a monetary policy focused on low and stable inflation21.
At the same time, a significant risk related to the financial markets integration is the possibility to shift
economic problems of one country upon other countries, which is greater than before (the contagion
effect). Between 1997 and 1998, countries of South-East Asia experienced this effect, when all of a
sudden capital flew out, bringing about financial crisis in economy after economy, which could not be
prevented by either the monetary or exchange rate policy.
Re 4)
One of the vital dimensions of globalisation is the fast spreading of knowledge, technology and
knowhow. The flow of know-how also applies to the public sector, including the central bank. One of the
features of modern central banking is gradual homogenisation of the strategies applied to the
monetary policy. Since 1990, when for the first time the central bank of New Zealand started to
implement the strategy of direct inflation targeting (DIT), over 20 central banks followed and adopted
that strategy. As a result, the DIT strategy (applied since 1998 by the NBP) is now the dominating
strategy of the monetary policy, applied by the majority of central banks in developed countries22, and
more and more, by central banks of the developing countries (such as Turkey, the Philippines, Ghana,
Romania and Armenia). A bloom of the DIT strategy endorses the observation that central banks
adopt the "technology" of low and stable inflation from one another.
The dissemination of the DIT strategy was accompanied by a decrease in the average inflation level,
especially in the developing countries that lowered inflation from a high level. This may prove that the
dissemination of the DIT strategy was one of the factors that have contributed to disinflation.
Admittedly, the impact of the DIT strategy on lowering inflation is a subject matter of discussion23;
however, empirical evidence exists that implementation of the DIT strategy improves macroeconomic
outcomes (lower costs of stabilising inflation, decreased influence of price shocks and output shocks
on inflation, thereby - decreased effect of past inflation on the current inflation, which reduces inflation
persistence)24. Empirical research also suggests that the DIT strategy facilitates stabilisation of
longterm inflation expectations25.
An additional result of dissemination of the DIT strategy is elaboration of standards of communication
in conducting the monetary policy (announcements of decision-making authorities, inflation reports
and published inflation projections), which facilitate contacts of the central bank with the external
environment (the financial market and the general public). It may be speculated that these standards
make the interpretation of the decisions made by the central bank easier for foreign investors, which
should, under the huge cross-border capital flows, increase the effectiveness of the monetary policy in
stabilising inflation.
Re 6)
As mentioned before, the process of globalisation is a serious challenge for central banks. Following
the increase in human workforce relatively to the capital resource, the pay of the workforce has gone
down, and so did the costs of manufacturing of many goods and services. Setting fuel prices apart,
whose increase is also brought about by globalisation, inflation in many countries remains very low,
whereas a strong increase in the global labour supply mitigates the possibility of occurrence of the
second-round effects i.e. wage increases in response to a rise in current inflation. On the other hand,
the global surplus of savings over investments causes the capital to chase the high yield opportunities,
thus increasing asset prices in many countries. An exemplary case may be increases in stock
exchange indices, bond prices or real property prices in Anglo-Saxon countries and e.g. in Spain. As a
logical consequence, a question arises about how the monetary policy should be conducted in these
circumstances, and in particular, whether it should respond to the increase in asset prices despite the
fact that inflation of consumer goods and services remains low or very low. Another vital question
arises about the appropriate level of central bank interest rates when long-term interest rates remain
low, possibly as a result of globalisation. A hot debate accompanies the issue, both among the central
bankers26 and among academics.27
The Chairman of the Federal Reserve, Ben Bernanke, in his address28 last month, presented possible
diagnoses regarding the sources of low interest rates on the bond market despite as many as fourteen
increases in the central bank references rates. There are at least two explanations of such situation. If
the long-term interest rates remain unchanged and the short-term ones increase, this means that
either the markets pessimistically assess the perspectives of economic growth or the risk premium
related to forward rates decreases; here this may be the inflation risk premium or real interest rates
volatility risk premium. Another explanation may be the very effect of global imbalances, i.e. the result
of large purchases of sovereign bonds by Asian central banks and oil- exporting countries. Depending
on which hypothesis is true, the implications for the monetary policy are different. If the long-term rates
go down as a result of poor growth prospects, the current short-term interest rates should be lowered
respectively so as to prevent possible deflation. If, however, specific factors related to globalisation or
decrease in the risk premium are the cause of persisting low long-term interest rates, the short-term
interest rate should be higher in order to achieve appropriate restrictiveness of the monetary policy
24
See Corbo V., Landerretche O., Schmidt-Hebbel K. "Does Inflation Targeting Make a Difference" in: N. Loayza and R. Soto
(red.) "Inflation Targeting: Design, Performance, Challenges" (Central Bank of Chile: Santiago 2002).
25
Gürkaynak R.S., Levin A.T., Marder A.N., Swanson E.T. "Inflation Targeting and the Anchoring of Inflation Expectations in
the Western Hemisphere", forthcoming in Mishkin, Frederic and Klaus Schmidt-Hebbel (red.), Series on Central Banking,
Analysis and Economic Policies X: Monetary Policy under Inflation Targeting (Santiago, Chile: Banco Central de Chile),
2006 and Gürkaynak R.S., Levin A.T. Swanson E.T. "Does Inflation Targeting Anchor Long-Run Inflation Expectations?
Evidence from Long-Term Bond Yields in the U.S., U.K., and Sweden", Federal Reserve Bank of San Francisco Working
Paper 2006-09, March 2006.
26
For example a question whether monetary policy should burst asset bubbles was hotly debated during the large European
Central Bank conference on 16 to17 March 2006.
27
The examples are the following articles: N. Roubini "Why Central Banks Should Burst Bubbles", mimeo, Stern School of
Business and Roubini Global Economics, January 2006, and A. Posen "Why Central Banks Should Not Burst Bubbles",
Institute for International Economics Working Paper WP 06-1, January 2006.
28
Bernanke B. "Reflections on the Yield Curve and Monetary Policy", Remarks by Chairman Ben S. Bernanke Before the
Economic Club of New York, 20 March 2006.
8 BIS Review 57/2006
resulting from the entire yield curve. While it is difficult to assess which hypothesis is correct, central
banks, as sailors did in the old days, should apply two iron rules: firstly, frequently determine their
position, secondly, use as many waypoints as possible. This means that, especially where new
phenomena emerge or there are structural transformations, the monetary policy must not be described
using just a few simple indicators, as e.g. inflation and output gap in the Taylor rule. Monetary policy
decisions should rather be a product of a complex analysis of a number of indicators and data and
cross-checked with qualitative information.
In turn, another Federal Reserve governor, Donald Kohn29, devoted his recent address to the analysis
of when and on what conditions the central banks should respond to rapid changes of asset prices. In
Kohn's opinion, there are two possible approaches. According to one of them, described as the
conventional monetary policy, the central bank focuses on stabilising the inflation, treats changes in
asset prices as an exogenous process and does not attempt to influence asset prices whatsoever. The
other option, described by Kohn as the "extra action policy", allows for a deviation of current inflation
from a level determined as stable in return for improvement of the perspectives of achieving price
stability in the future. However, the extra action policy does not mean piercing the speculative bubbles
by central banks, and means rather "taking out" of additional insurance against possible negative
shocks, which may happen in the future. In Kohn's opinion, the extra action policy may be run very
rarely and only where the three conditions are met:
• the central bank must be able to identify asset bubbles in a timely manner and high certainty
as to the correctness of analysis conclusions;
• there must be a high probability that a slight tightening of the monetary policy will be able to
stand against the speculative activity on a given assets market;
• the expected improvement of the future economic situation resulting from a smaller
speculative bubble must be significant and higher than the cost