the difficulties implementing those measures, and the short - term tension between fiscal consolidation programs and economic growth. consequently, uncertainty continues to prevail in the eurozone, a situation which over the last two years has contributed substantially to the volatility of international financial markets. obviously, instability has affected mexican asset prices and, in particular, the value of the mexican peso versus the u. s. dollar. the peso market is highly liquid and the floating exchange - rate regime in place since 1995 has functioned as a “ shock absorber ” for the economy. the complexity of the problems in the euro area likely means that it will be some time before sufficient solutions are finally implemented. hence, it is reasonable to expect that the eurozone may continue to fuel recurrent episodes of heightened risk aversion with global financial repercussions. also, the euro area will continue to be a drag on the global economic recovery. as the possibility of the occurrence of a tail - event in that area has not sufficiently diminished, additional deterioration of global economic prospects cannot be ruled out. this in turn could further constrain mexico ’ s economic recovery. two comments on external implications for mexico are in order. first, it is possible that some of the wider variability posted by the mexican peso relative to other emerging - market currencies during recent months reflected fears of contagion from europe through banking channels, given that the two largest spanish banks hold a significant share of assets in the mexican financial system. although caution is always a good strategy for economic policy, sound regulation and the positive performance of foreign bank affiliates give pause to these concerns. foreign banks can only operate in mexico as subsidiaries, and hence they have to comply with the same regulatory requirements as domestic banks, including limits for related - party lending and high capitalization standards. additionally, while many financial institutions in advanced economies are deleveraging, and given the under - banked nature of the mexican economy, both foreign and domestic banks in mexico have continued to expand their infrastructures as well as their lending to the private sector. second, the increasing monetary accommodation adopted by the u. s. federal reserve and other central banks in advanced nations since the global financial crisis may have contributed to the international search for yield that has caused substantial capital inflows to emerging - market economies. in particular, considerable flows have been directed to pesodenominated mexican government bonds during the last two years, allowing downward shifts of the domestic yield curve in tandem

without measureable concepts, diagnostics may end up requiring the tracking of too many variables and, more importantly, unambiguous evaluation becomes cumbersome. furthermore, there is a lack of consensus on what leads to financial crises, including prominently, the most recent global turmoil. one view is that financial systems tend to be inherently unstable due to either information asymmetries, agency problems and see financial stability board, et al. ( 2011 ), macroprudential policy tools and frameworks, progress report to g20, october. bis central bankers ’ speeches externalities, or weaknesses in the decision making of market participants, as exemplified by herd behavior. one way of looking at this is to identify long financial cycles, which manifest themselves as sequences of booms and busts in credit and asset prices. hence, macroprudential tools are proposed as a way to smooth the system ’ s intrinsic instability. 2 this view contrasts with an alternative approach, according to which crises arise largely as a result of ill - designed economic frameworks, including monetary, credit, and bank protection policies. under this perspective, macroprudential instruments carry less weight, as the focus is on preventing policies from being the causes of the problems in the first place. a second evaluation challenge has to do with the limited knowledge we have on the transmission mechanisms through which macroprudential tools operate. no commonly shared model is at hand to assess these instruments comprehensively. a third difficulty stems from scarce available data to test the tools consistently, especially those recently implemented. this panorama makes clear that further progress is needed to arrive at quantifiable definitions and operational frameworks in order to appraise macroprudential policies. for the time being, given the importance of these factors, it is essential to take into account the limitations of any evaluation exercise. 3 what we know about effectiveness the prescription for macroprudential measures has given rise to empirical research. while it is impossible to summarize all of it, i would like to highlight some recent results. 4 work on cross - sections of countries supports effectiveness from particular macroprudential tools on credit expansion. for example, one study concludes that a wide range of instruments are capable of reducing the procyclicality associated with loan growth. another demonstrates that tighter loan - to - value and debt - to - income have greater impact when credit increases rapidly and housing prices are high relative to income. looser measures, in turn, have smaller