than 20 % in 2007. subsequently, they plunged to virtually 0 % in 2008 and 2009 and have remained low ever since. not all types of flows show the same dynamics over time : fdi and portfolio equity flows have been fairly resilient, while bank flows and debt portfolio flows have been very significantly affected, resulting in a marked changed in the composition of gross flows. these sharp fluctuations are clearly not optimal. even bearing in mind the caveat that i have outlined earlier on the lack of a clear benchmark, it looks like international capital flows are too abundant in good times, potentially fueling domestic bubbles and destabilizing national financial systems, and prone to “ sudden stops ” in bad times. emerging market economies have experienced numerous examples of “ surge ” episodes of capital inflows followed by perilous sudden stops. current ( and preliminary ) data suggest that some emes are currently experiencing very large outflows. the potentially destabilizing effects of capital flows may be magnified in the current situation, with disappointingly slow economic growth ( of a cyclical and structural nature ), high volatility in commodity and asset prices, the persistence of both internal and external imbalances in key countries and regions, substantial amounts of currency mismatch on balance sheets in emerging market economies, etc. bis central bankers ’ speeches ii. so what should be done? i think that we should try to be both pragmatic and ambitious. if we are not pragmatic we will waste time exploring paths that will not lead us anywhere, but if we lack ambition we will never make progress. we should, first, develop a framework to prevent excessive capital flow volatility. here i see three main avenues to explore : ( i ) improving the monitoring of capital flows and hence taking forward the work on data gaps on foreign currency exposures and mismatches. ( ii ) proactive macro - prudential regulation to prevent unsustainable debt and limit foreign currency borrowing can be useful to reduce the procyclicality of financial flows, avoid excessive risk - taking and ensure an orderly external sector adjustment. ( iii ) finally, one could also explore state contingent financing instruments, such as gdp linked bonds, which could also offer innovative means to smooth external financing needs and avoid expanding scarce resources on assistance programs. however, prevention can never cover all risks and so, we need a stronger gfsn. as highlighted by the imf the global financial safety net,

supply shocks, which is quite unprecedented? central banks are said to achieve a soft landing if they can bring inflation back down to target at a low cost for employment – a low sacrifice ratio in economic jargon. of course, part of the observed disinflation was due to the reversal of the same supply factors that caused high inflation in the first place, such as energy prices. and the resilience of employment might be supported by specific labor market factors, including its significant improvement in europe and france. but i want to focus on the role of monetary policy in driving disinflation. let me emphasize one aspect that is at the center of modern monetary policy, namely well - anchored inflation expectations. 1 / 4 bis - central bankers'speeches central bank independence and the shift to direct inflation targeting – instead of steering monetary aggregates – are an important legacy of the victory over inflation in the 1980s. a credible commitment to return inflation to target ensures that the public sees high inflation as temporary. ultimately, this leads to price - and wage - setting remaining " anchored " around our inflation targets, and avoids wage - price spirals. a central bank with a strong and credible reaction function significantly shortens inflationary episodes and reduces the cost on activity and employment. this is precisely the mechanism that played out during the inflation surge of 2022. as soon as monetary tightening accelerated in mid - 2022, the initial rise in inflation expectations reversed downward. this solid anchoring of expectations marks a decisive difference with the 1970s : the enhanced credibility of central banks, thanks to their independence and the success of inflation targeting, has been bolstered by their forceful reaction, thus obviating the need to raise real interest rates to levels as high as those seen in the past. my host and co - panelist, john williams, has identified three criteria for assessing wellanchored expectations. 4 reviewing these for the euro area, the first two criteria – a lack of sensitivity of long - run inflation expectations to macroeconomic news and levels consistent with the target – are clearly fulfilled : long - term inflation expectations have remained rather stable and not too far from the ecb's 2 % target. the third " uncertainty " or dispersion criterion requires that uncertainty about future inflation should increase less than linearly with the forecast horizon. it is more challenging to assess due to data limitations. however, i take comfort in the evidence from the ecb survey of professional forecasters ( spf ), which paints