We all know the tremendous innovations there have been in market technology and the number and type of financial products. But just as striking, perhaps, has been the sheer growth in the number of people and countries that can make use of them. It was not very long ago that official flows to these economies exceeded private ones. Now, many of the countries that years ago were in the thick of the debt crisis are finding it possible to extinguish Brady bonds by issuing in their own name, without U.S. Treasury collateral. But if we are learning daily of the advantages of private capital flowing more freely across the globe, we are also becoming keenly aware of the risks.
External finance can add to a country's investment resources and promote faster growth.
Yet the costs of these crises go well beyond damage to budgets. They can undermine economic stability and growth and, sometimes, even the stability of a whole society. Establishing a strong framework of policies and regulatory institutions to underpin the financial sector will be the key to sustaining the growth which so many emerging economies have enjoyed these past years and maintaining stability. As I look at the challenge this presents to emerging markets I am mindful of the fact that the institutions and laws we have in the U.S. to supervise our domestic financial system were developed step by step over a period of a hundred years. And we, too, face a daily challenge ensuring these institutions keep abreast of changes in the market.