world going down that road? i don ’ t believe so. while we have had our share of financial crises in the past like the mexican and asian crises, i believe that the global financial system is flexible enough to adjust and recover. but it will take more time than we may think. so we must be prepared for some tough three years ahead of us. credit unions you may be asking what has this international financial market turbulence worry you as a credit union. you operate in your own domestic market. let me therefore stress that credit unions are part of the country ’ s financial system. the three issues that i raised before of transparency, liquidity and regulation are very relevant to credit unions. how transparent is your credit unions to your members and the general public? how do you manage liquidity? do credit unions need more supervision? commercial banks are at the forefront of the financial system. finance companies and perhaps insurance companies follow close behind. but credit unions are somewhat in the background at least in fiji. why? it is not because of the number of the credit unions. i do not think it is also because of the size of your assets nor of its lack of growth. the 2007 woccu statistical report indicated that credit unions have experienced significant growth. for 2007, they reported 49, 134 credit unions with over 177 million members from 96 different countries. with a significant asset base of over a trillion dollars, it is evident that credit unions are relatively sizeable, dynamic and continue to grow. in fiji the sector consists of approximately 15, 000 members and $ 25 million in assets. 15, 000 members represent 2 percent of the total population. i have the view that credit unions have stayed with the time tested products of consumer lending to its members. unlike say commercial banks that offer diversity of deposit, loan and investment advisories, my limited understanding of credit unions shows that you basically collect dues and provide cash loan to members. it is a very narrow product. credit unions definitely have a role to play. if we go back in history, credit unions sprang from the need to fulfill basic human needs in the great depression. amidst escalating unemployment, poverty and starvation and high levels of household debt, i am told that the first credit union was born in a small german village in the 1840s. the villager pooled their funds from which they were allowed to borrow money from at a very low interest rate. this arrangement proved to be a very effective solution for members with high debt levels who individually

economic benefits, including more efficient resource allocation, along with welfare gains from deepening specialisation, cheaper products, and greater product choice. but as the economic and financial effects of a changing global landscape are multifaceted, they imply several policy challenges at both the domestic and international level. i do not intend to address all of these policy challenges today, rather, i would like to focus on two specific challenges : the implications of globalisation for inflation and monetary policy, and the governance of globalisation at the international level. see imf ( 2007 ), “ the globalization of labor ” ( world economic outlook, april ). source : imf balance of payments statistics. globalisation and its implications for inflation and monetary policy the aspects of globalisation i have been describing thus far entail many important macroeconomic consequences for the euro area as well as other global regions. 3 perhaps most crucial from a central banking perspective is the impact on consumer price inflation. while several ways of classifying the impact are possible, i think that a simple taxonomy of globalisation ’ s influence on inflation into two main channels – direct and indirect – provides a useful one in characterising the effects on inflation. first, globalisation has strong direct effects on price movements of certain goods and services, and in this sense can be thought of as a shock exerting a strong influence on relative price dynamics. on the one hand, increasing trade openness seems to have had a downward impact on manufacturing price developments over the last decade or so. in the euro area, rising imports from lower - cost countries, mainly from china and the new eu member states, appear to have put downward pressure by an average of approximately 2 percentage points per year on extra - euro area manufacturing import prices over the period 1995 - 2004. 4 on the other hand, globalisation and its implications for global demand, has implied strong increases in other prices. here, i am thinking of the upward pressure from commodity prices that derived from strong growth of commodity imports by emerging markets – both concerning energy and, more recently, food. these price rises have been impressive to say the least. since 2002, the price of brent oil has risen more than five - fold in us dollar terms, while the price of non - ferrous metals has risen more than three - fold. since the beginning of 2006, such large price increases have also extended to food – with at least a doubling in the price of wheat, maize and soybeans. while i would not claim