I accept the proposition that as countries become more integrated into the globalising financial markets, they will come under pressure to move out of the middle ground of heavily managed exchange rates towards either more fixed or more flexible arrangements. In that world, we are obliged to think rather carefully about how we expect to use our reserves. Only then can we begin to answer the difficult questions of how large they must be and how they should be structured. Finally, a theme which has already emerged in our discussions at this conference. I am in no doubt about the benefits of a reserves management framework that pulls more directly into consideration the liabilities side of the central bank's and consolidated government's balance sheets.
Reserves can be very costly to hold and can entail very significant risks.
Those costs and risks can be better identified, and better managed, where both sides of the balance sheet are visible and jointly considered.