remarks by mr. javier guzman calafell, deputy governor at the banco de mexico, on “ emerging economies in a new global cycle : central bank perspectives ”, at the 9th annual conference organized by the central reserve bank of peru and the reinventing bretton woods committee “ new challenges for global economic integration ”. cusco, peru, july 24, 2017. 1 i thank the banco central de reserva del peru and the reinventing bretton woods committee for the invitation to participate in this event. after having reached a post - crisis low in 2016, global economic activity seems to be transitioning to a faster, although still moderate, growth trajectory starting this year. the recovery is supported by the upturn in global merchandise trade, notably in capital goods, and an improved dynamism in the industrial sector, especially in manufacturing. the improved economic situation in the advanced economies is particularly noteworthy. naturally, this has enhanced confidence in the global economic outlook and reduced the perception of risks deriving from tail scenarios, although these cannot be completely ruled out. notwithstanding these positive developments, the world economy seems to have lost part of the long - term dynamism displayed in the past, as global gdp growth during 2017 - 2022 is forecast to be, on average, almost one percentage the opinions and views expressed in this document are the sole responsibility of the author and do not necessarily represent the institutional position of the banco de mexico or of its board of governors as a whole. point lower than in the pre - crisis years of 2000 - 2007. furthermore, the current juncture continues to be characterized by a number of important risks. to start with, the future evolution of the global economy faces a high level of uncertainty related to the lack of clarity and details about the direction to be taken by economic policy in the united states, particularly on the fiscal, regulatory and trade fronts. second, the recent strengthening of a widespread sentiment against globalization, along with the political support it has been able to garner, certainly threatens to stall, and in some instances even reverse, the progress towards the economic and financial integration of the global economy achieved over the last decades. third, as the ongoing recovery continues, it is natural to expect that the normalization of monetary policy in advanced economies will begin to generalize. while this should in principle be considered as a positive development, it is not free of risks, as it implies a tightening of financial conditions for emerging market economies ( emes ) and a major policy shift with potential

in this respect, since its costs would have been much higher in the absence of cooperation. but more generally, i would underline the following : see, for instance, friedman, milton ( 1953 ) : “ the case for flexible exchange rates ”, essays in positive economics, pp. 157 - 203. see, for instance, rey, helene ( 2015 ) : “ dilemma not trilemma : the global financial cycle and monetary policy independence ”, nber working paper no. 21162, may ; and rogoff, kenneth ( 1985 ) : “ can international monetary policy cooperation be counterproductive? ”, journal of international economics 18 : 199 - 217, may. • from a theoretical point of view, the existence of spillovers implies the presence of externalities. if not taken into account properly, i. e. internalized, the latter will imply inefficient results. in other words, policy cooperation is needed. this applies even under flexible exchange rates, since they do not fully insulate countries from external shocks. • the close linkages and interconnections currently existing in a highly interdependent global economy set the stage for a spillover - rich environment, as shocks and policy choices in one country or region are easily transmitted to the rest of the world. 4 naturally, the potential implications for worldwide output, inflation and financial stability from policy choices in systemically important economies are especially relevant. • the analysis of the nature, magnitude and direction of spillovers from monetary policy can be further complicated by the use of unconventional monetary policy measures. for instance, according to recent studies, 5 the implementation of such policies by the us federal reserve has had a greater impact on economic and financial variables of emes than in the us economy itself. additional challenges relate to for instance, the bank for international settlements estimates that a 100 basis - point change in the 3month interbank rate in the us induces a 34 basis - point change, in the same direction, in the corresponding interest rate abroad, while the effect is nearly twice as large in the case of 10 - year government bond rates. in regards to pure monetary spillovers, policy rates abroad are also found to respond to changes in the monetary policy stance in the united states, as a 1 percentage - point change in the federal funds rate is associated with changes between a quarter and a half that magnitude elsewhere. see hofmann, boris and elod takats ( 2015 ) : “ international monetary