volatility of capital flows. these include both appropriate exchange rate and financial regimes. but, in fact, we seem to only play lip service to such an optimal sequencing of policies. some worry, perhaps with reason, that sequencing might become an excuse for not moving ahead with capital account liberalization. what we really seem to encourage is rapid liberalization, independent of the state of the banking and financial sector, hoping that financial liberalization will pressure the authorities to move more quickly with improvement in supervision and regulation. the asian crisis is, i believe, a test of this approach. at the very least, we have to match the pace of capital account liberalization with careful consideration of exchange rate regimes and efforts to improve corporate governance and bank regulation and supervision. the sequencing perspective also suggests that the story behind the crisis in emerging asian economies may have less to do with the inherent instabilities of global capitalism than with a mismatch between the evolution of institutions and policies and the pace of liberalization of financial markets and the capital account, the critical entry points to global capitalism. what may be in play, therefore, are the transition costs of a rapid increase in globalization, and especially transition costs associated with entry of emerging market economies into the global economy. a third theme in my interpretation of the asian crises is perhaps a lesser focus in hy ’ s work, but he was nevertheless quite prophetic in relation to the recent crises. hy warned that the ability of a central bank to act as a lender of last resort is limited to debts denominated in the country ’ s own currency. 3 when countries finance their domestic projects with foreign denominated debt, therefore, they lose the stabilizing potential of their central bank ’ s lender of last resort power and confront a far more challenging and potentially unstable environment. in the case of the asian crisis, the financing of domestic projects with foreign denominated debt — either directly or through the banking system — created an important vulnerability, one that was dramatically aggravated by the sharp depreciation of the currencies in the crisis countries, and one that domestic central banks had limited power to arrest. so, what are the lessons from this framework for thinking about recessions in general and the asian crisis in particular? it would be tempting to encourage countries to avoid adverse shocks. but of course, shocks are, by definition, unavoidable. to be sure, risks can be avoided or mitigated by limiting vulnerabilities

: / / www. federalreserve. gov / supervisionreg / reghcg. htm. - 7efforts are cra - eligible activities. 14 our community advisory council has urged more research on the effect of climate change on low - to moderate - income communities in order to help inform more effective responses. 15 working with local communities, the federal reserve staff have highlighted the ways in which lower - income households and underserved areas tend to be particularly vulnerable to natural disasters. 16 with low levels of liquid savings to meet emergency expenditures, these households tend to be less resilient to the temporary loss of income, property damage, and health outcomes they face from disasters. 17 in our community development work, we seek to encourage lenders and their local communities to rebuild in ways that will increase their resilience to future risks. advancing our understanding the staff across the federal reserve system are researching a wide range of topics related to climate risks, including how weather and natural disasters affect economic and financial outcomes and the economic implications of climate policies, including for the energy sector. 18 we currently assess the effects of severe weather kevin dancy ( 2018 ), “ weathering the storm : a framework for meeting cra obligations, ” federal reserve bank of dallas, community development publications ( dallas : frb dallas, august ), https : / / www. dallasfed. org / cd / pubs / storm. aspx. community advisory council and board of governors of the federal reserve system ( 2017 ), record of meeting ( washington : board of governors, may 26 ), https : / / www. federalreserve. gov / aboutthefed / files / cac - 20170526. pdf. jesse m. keenan and elizabeth mattiuzzi ( 2019 ), “ climate adaptation investment and the community reinvestment act, ” community development research brief 2019 - 5 ( san francisco : federal reserve bank of san francisco, june ), https : / / www. frbsf. org / community - development / publications / communitydevelopment - research - briefs / 2019 / june / climate - adaptation - investment - and - the - community - reinvestmentact. community advisory council and board of governors of the federal reserve system ( 2019 ), record of meeting ( washington : board of governors, november 1 ), https : / / www. federalreserve. gov / aboutthefed / files / cac - 20191101.