begin unwinding its policy in the near future is a welcome development. it will likely reflect stronger u. s. economic performance, which should favor the world economy, especially those countries most closely linked to the united states. normalization, in turn, is a precondition for containing the accumulation of possible vulnerabilities that could eventually jeopardize global economic improvement. in any case, the future likely scenario for advanced nations is one of divergent monetary paths. while the united kingdom will perhaps be next after the united states in unwinding stimulus, the european central bank, the bank of japan and other major central banks could further loosen monetary stances. the pace in each direction is highly uncertain. for an estimation of real effects of unconventional monetary policy, see, for example, engen, e. m., et al. ( 2015 ), “ the macroeconomic effects of the federal reserve ’ s unconventional monetary policies, ” board of governors of the federal reserve system finance and economic discussion series 2015 – 005, january ; and wu, j. c. and f. d. xia ( 2014 ), “ measuring the macroeconomic impact of monetary policy at zero lower bound, ” chicago booth research paper 13 – 77, july. two analyses on the possible real consequences of deflation are : atkeson, a. and p. j. kehoe ( 2004 ), “ deflation and depression : is there an empirical link? ” american economic review, 94 ( 2 ) ; and ryska, p. ( 2014 ), “ deflation and economic growth in long - term perspective, ” charles university in prague, institute of economic studies working paper 18 / 2014. for a review of possible risks from prolonged monetary expansion, see hannoun, h. ( 2015 ), “ ultra - low or negative interest rates : what they mean for financial stability and growth, ” speech at the bis eurofi highlevel seminar, april. bis central bankers ’ speeches effects on emerging economies unconventional monetary policies in developed countries have had significant bearing on emerging markets. financial stabilization in a u. s. economy overwhelmed by the global turbulence was clearly positive, as it mitigated significant outward contagion. to the extent that a larger collapse was avoided, other countries benefited, a comment that can also be extended to the subsequent u. s. economic rebound. the search for yield stemming from abundant liquidity since 2010 has translated into substantial capital flows, especially portfolio

cleaning - up of highly speculative positions. mexico ’ s relative resilience to external shocks seems to be based on a solid economic foundation, including prudent fiscal management, monetary policy focused on controlling inflation, and a sound regulatory and supervisory framework for financial institutions. additionally, a broad reform agenda may be contributing to a positive perception of the economy. nevertheless, recent financial developments are no guarantee of future tranquility. the challenges ahead are faced by other emerging markets as well. mexico can further differentiate itself through commitment to an announced multiyear reduction of public debt, the convergence of inflation to the permanent target, and a profound implementation of ongoing structural reforms. these measures should foster financial stability and long - term economic growth. concluding remarks the likely divergent monetary paths of advanced nations pose challenges for emerging economies. the proximity of the liftoff of rate hikes in the united states is encouraging, as it will reflect a strong economic performance that should favor the world recovery. the intended gradualism by the fed, and the possible continuation of monetary expansion by the european central bank and the bank of japan, may suggest that the global economy will still see abundant liquidity, with relatively benign financial conditions for emerging markets. however, uncertainty surrounding the pace of u. s. normalization and of monetary actions in other countries may give rise to episodes of international financial volatility. in particular, market sentiment towards emerging economies could change. the best strategy for countries to shield themselves against external shocks is to strengthen economic fundamentals, while at the same time authorities remain on alert for factors that would put financial stability at risk. finally, mexico can potentially remain attractive to investors by assuring public debt sustainability, consolidating convergence of inflation to the target, and implementing ongoing structural reforms in a deep - seated, effective manner. bis central bankers ’ speeches