and unbalanced ( with less liquidity in the longer term issues ). central banks also have a specific interest in the improvement of domestic bond markets, in particular for public sector debt. one reason for this is that more complete markets reflect the relationship between borrowing costs and terms. making an explicit yield curve reveals information about the expectations that the economic agents have, which is essential for business decisions. recent experience has shown that the development of bond markets must be based on placing funds in domestic currency, which is not only relevant for the transmission of the monetary policy but also as a mechanism to reduce external vulnerability. i would say that financial integration in general plays and important role enhancing the power of monetary policy instruments. in particular, when assessing the effectiveness, credibility and commitment of monetary policy in emerging markets to deal with inflation and inflation expectations. the depth of the financial system and its integration with capital markets has a powerful disciplinary effect on monetary policy as it reduces incentives to expand as foreign capital would flow out to other markets with more predictable returns. for this purpose, a precondition is the reduction of the macroeconomic volatility so typical of our region. we need not only to sustain but also to strengthen the pillars of, what i call the new economic paradigm, with several anti - cyclical components : - fiscal solvency. today fiscal responsibility in most of the emerging world is not a feature from the left or the right : it is just common sense. - monetary robustness and consistency. - more flexible foreign exchange regimes. - reduction of net foreign debt and currency mismatches. a lesson from current turmoil is that emerging markets with current account deficits and fiscal deficits were hit the most as they became more vulnerable to foreign capital outflows. - trade dynamism ( diversifying destinations and products ). just as an example, the share of exports to the united states, one of the major destinations of foreign sales, from 2002 to 2006 dropped from 33 % to 27 % of total latin american exports and from 21 % to 18 % of the emerging asia total. this is very important as the us and other developed countries face also significant challenges. - accumulation of international reserves ( insurance against external shocks ). and the later has been, i would say, the common pattern all across the emerging world. today, with no international lender of last resort, there is no good substitute for a sound external liquidity policy at the country level. i am afraid it is the responsibility of every

rules form a developed country to a developing one does not necessarily mean the latter ’ s progress ), rather, they are endogenous to each society. they are the result of collective decisions where groups with different attributions and preferences take place, whose political power hinges on political institutions ( de jure political power ) and on distribution of economic resources ( de facto political power ). even if this collective decision - making process may take time, the fact that institutional reforms are carried out based on “ conviction ” rather than on “ need ” and with the necessary consensus, clearly improves the possibilities of success and its long - term persistence. now policy makers worldwide seem to understand that policy recipes vary from one case to the other in this complex scenario. this progress is, obviously, welcomed. especially for us, emerging markets ’ policy makers, as we have to catch up with growth, deal with the tensions derived from buoyant economies and, most importantly, build institutions and credibility at the same time. in fact, it is more a synchronic than a sequential two - fold challenge. to implement these policies effectively, the only possible way is to keep a consistent ( i mean consistent with the history and idiosyncrasies of each economy ) and gradualist approach. thank you.