Precautionary reserve accumulation, however legitimate, unavoidably creates side effects for domestic macro policies as well as spillover effects on other countries. Stabilizing the demand for international reserves would therefore bring huge benefits in terms of world welfare. The need for national reserves could be reduced if credible mechanisms exist to provide for the supply of official liquidity on a multilateral basis. Hence the current search for international financial safety nets which has taken first stage in the G20. Finally, I would like to say a few words about financial development. Differences between countries, are striking, whether one looks at capital account regimes, the broadness and debt of domestic financial markets or, more generally, their ability to generate locally a sufficient supply of safe and liquid assets. Some of those differences reflect true social choices and preferences that must be respected and accommodated. Others result from deliberate or inadvertent policy‐induced distortions, which should be reduced or eliminated. Domestic financial imperfections and frictions in international capital flows interact with each other to create and amplify imbalances. Ultimately, financial instability is a product of this interaction. Part of this instability shows up in exchange rates movements. It is very unlikely that a global capital market driven by constant frictions between highly different domestic financial systems would lead to a stable – and fundamentals based – equilibrium in foreign exchange markets. Ensuring that our different financial systems interact harmoniously should be a policy priority. Greater compatibility in approaches to financial regulation between advanced and emerging economies is within reach.

They will discuss how countries can best formulate labour market policies in the pandemic’s wake to restore and rebuild workers’ ability to engage in the labour market of the future. 13 At lunchtime, we are privileged to have Professor Emi Nakamura join us virtually. She will speak on “Inflation, Monetary Policy and the Phillips Curve”, a topic that that has become dominant to policy considerations this year. 14 Anchoring today’s discussions is Professor Ricardo Reis, the author of this year’s Commissioned Paper, who will discuss whether monetary policy has placed an undue emphasis on the natural real rate of interest, which we term r* and measure by government bond yields, a parameter that is inherently tricky to define and problematic to measure. Despite these difficulties, r* has seemingly come to occupy a central place in assessments of the appropriateness of the policy stance, a conundrum that Professor Reis will help clarify. We are delighted that Professor Andres Velasco and Professor Vissing-Jorgensen are with us to discuss the paper. 15 But first, we are honoured to have Dr Li Bo, Deputy Managing Director at the IMF, to deliver the opening address for AMPF2022. He brings with him a wealth of experience in economic policymaking, serving in a range of monetary- and macroprudential-policy related roles at the People’s Bank of China, before assuming his current position at the IMF. Dr Li’s breadth of experience and depth of technical expertise will offer pertinent insights, at this complex global conjuncture. ***  © 2022, Government of Singapore.