stock exchanges of the world. soon, we will also have a swift service bureau in sri lanka and that will help to reduce cost of financial transactions. together with these infrastructure developments, our banking system has expanded their horizons by introducing several innovative infrastructure facilities and complex financial products as well. the atm network of the country has doubled during the last five years and the number of credit cards in use have more than tripled. improvements in internet banking, tele - banking and mobile banking facilities are very significant and the progress is mind - boggling. there have been significant improvements in financial markets too. with the introduction of lankasecure, the scripless securities settlement system, in 2004, government securities are transacted on delivery versus payments ( dvp ) basis and now nearly 27, 000 beneficiary accounts are maintained at the lankasecure. recently we also allowed foreigners to own 5 % of government securities through a new tiera account that we introduced, and so far, foreigners have purchased us $ 55 million worth of treasury bonds. this is a new instrument that has enhanced liquidity in the capital market developments in the foreign exchange market are also immense. helped by the continuous growth in imports and exports, and specially with the recorded improvement in migrant earnings, values and volumes of forex transactions through formal channels have improved significantly during recent years. the initiatives we are taking will also improve this sector further in the years to come. in conjunction with these improvements, banks have now stepped forward to introduce new derivative instruments to the market. as you all know, cpc has now started to use hedging mechanisms to minimize the exchange rate exposure, which we expect that would be followed soon by other large public and private sector organizations. performance of the share market has of course been spectacular. the colombo stock market has gained by 35 % on average during the past 5 years. the growth during the last year was over 50 % and the trend has continued so far during the year. with the expansion of cse to regional cities such as matara and kandy, the contribution of outstation customers in stock market activities have increased significantly and this trend should be encouraged. however in comparison to other regional countries, our insurance penetration rate is still low, although the developments in the industry during recent years have been impressive. as the country observes these developments in the financial sector, the regulatory mechanism has strengthened as it should be. the central bank continues to supervise the banking sector, finance companies, leasing companies, and

, the devil lies in the econometric details, and i acknowledge that exchange rate adjustment has served us well in many instances, allowing monetary policies to adjust to national circumstances. neither do i underestimate the difficulties in a world of nation - states of altering the parameters of the current system. but whether the shock absorbing role of exchange rates can be taken for granted is a question we should all reflect on. it is clear to me that there is much more about the functioning of the international monetary system that we need to understand. it ’ s another field in which we as policymakers, once again, depend on you as researchers. importantly, this discussion suggests that a frequently heard explanation for the challenges facing the euro area – that its participating economies are suffering from having given up exchange rate flexibility – may be too simplistic. indeed, it is worth remembering that monetary union was created precisely because cycles of repeated devaluations did not yield macroeconomic stability, and that was in a world of less intense capital flows. indeed, as see ahmed et al. ( 2015 ), “ depreciations without exports : global value chains and the exchange rate elasticity of exports ”, world bank policy research working paper 7390 ; see also the imf world economic outlook 2015, october, chapter 3. see maggiori, m., and x. gabaix ( 2015 ), “ international liquidity and exchange rate dynamics ”. quarterly journal of economics, 3, pp. 1369 – 1420. see farrant, k., and g. peersman ( 2006 ), “ is the exchange rate a shock absorber or a source of shocks? new empirical evidence ”. journal of money, credit and banking, 38, pp. 939 – 961. see bruno, v., and h. s. shin ( 2015 ), “ cross - border banking and global liquidity ”. review of economic studies, 82 ( 2 ), pp. 535 – 564. see rey, h. ( 2013 ), “ dilemma not trilemma : the global financial cycle and monetary policy independence ”. in : jackson hole economic symposium 2013. bis central bankers ’ speeches charles engel and co - authors have argued, there is little evidence that real exchange rates under floating rates adjust in a desirable way. and a currency union can actually deliver a superior performance, because it reduces the deviations from price equality for traded goods that can occur under a floating regime