understanding the greenspan standard, ” in the greenspan era : lessons for the future, proceedings of the jackson hole symposium 2005, federal reserve bank of kansas city, pp. 11 - 96. calvo, g. and c. reinhart ( 2002 ), “ fear of floating, ” quarterly journal of economics, vol. 107, no. 2, pp. 379 - 408. cecchetti, s., h. genberg, j. lipsky y s. wadhawani ( 2000 ), asset prices and central bank policy, geneva reports on the world economy no, 2, icmb and cepr. ellis, l. ( 2008 ), “ the housing meltdown : why did it happen in the united states?, ” bis working paper no. 259. keys, b., t. mukherjee, a. seru and v. vig ( 2009 ), “ did securitization lead to lax screening? evidence from subprime loans, ” quarterly journal of economics, forthcoming in vol. 125, no. 1. loutskina, e. and p. strahan ( 2006 ), “ securitization and the declining impact of bank finance on loan supply : evidence from mortgage acceptance rates, ” mimeo, darden graduate school, university of virginia. figure 1 countries experiencing drops in real gdp in the fourth quarter of 2008 ( * ) ( percentage of total sample ) ( * ) using the annualized quarterly gdp for a sample of 29 developed and emerging economies. source : central bank of chile. figure 2 gdp ( annual change, percent ) - 2 - 2 - 4 - 4 - 6 - 6 latin america ( * ) world at ppp 10 ( f ) developed ecoomies ( * ) simple average of annual gdp change in argentina, brazil, colombia, chile, mexico, peru and venezuela. ( f ) forecast. source : central bank of chile based on data from investment banks, consensus forecasts, and imf. figure 3 monetary policy and housing prices monetary policy housing prices ( percent ) ( nominal index, first quarter 2001 = 100 ) 00 01 02 03 04 05 06 07 08 09 u. s. a. chile ( * ) canada 01 02 03 04 05 06 07 08 09 australia chile canada u. s. a. spain ( * ) as from august 2001, the monetary policy interest rate is set in nominal terms. before that, it was indexed to the cpi. sources

of instruments has to do with capital adequacy. however, this is not enough, and it is no trivial to judge the soundness of the financial system by its capital and leverage levels. higher levels of capital will certainly have to be required in the future, particularly as banks gradually assume higher levels of risk. such is the spirit of the basel ii standards, but this crisis has proved they do are not enough. it will be necessary to examine how capital requirements and accounting norms may have amplified the financial crisis, and what must be done to avoid the excessive procyclicality of the banking activity. fortunately this has not been a problem in the financial systems of colombia, chile and the rest of the region, where regulatory schemes worked. banks are adequately matched in terms of currencies, an aspect that used to be the achilles heel of our banks. central banks must strengthen and perfect the models with which they carry out their stress tests. they should take into account the interconnections within the financial system and detect vulnerabilities opportunely. we have seen how the u. s. investment banks, insurance companies and other non - banking agents of the financial system played a leading role in the origin and spread of the crisis, but were not at the heart of the banking supervision network. of the many aspects that may be debated with respect of the financial system, there is one that should be singled out, especially to the extent that banking systems of emerging economies continue along the lines of financial innovation. it is important to allow securitization, but establishing incentives for both credit screening and monitoring of payments to remain at the banks and that the process of transferring credit risk away from individual institutions ’ balance sheets does not escape the authority ’ s eye. the current crisis should not become a hindrance to financial development, but a sign of alert in favor of prudence and rigor when assessing the innovations. thank you very much. references batini, n. and e. nelson ( 2000 ), “ when the bubble bursts : monetary policy rules and foreign exchange market behavior, ” mimeo, bank of england. bernanke, b. and m. gertler ( 1999 ), “ monetary policy and asset price volatility, ” in new challenges for monetary policy, proceedings of the jackson hole symposium 2005, federal reserve bank of kansas city, pp. 77 - 128. blinder, a. and r. reis ( 2005 ), “