flows and exchange rates cannot be ignored in macro policy settings, especially in emerging market economies. in advanced economies, capital flows and exchange rate movements are generally viewed as equilibrating mechanisms outside the remit of macro polices. but for emerging market economies, they can spell serious macroeconomic and macro - financial trouble. capital flows can fuel domestic credit and asset price bubbles. capital flows can induce exchange rate fluctuations that are disconnected from macroeconomic fundamentals. in the face of large and volatile capital flows, a freely floating exchange rate can become a shock amplifier rather than a shock absorber. studies by both the imf and bis find that exchange rate movements have perverse, destabilising macroeconomic and financial effects in emerging market economies, in contrast with their stabilising effect in most advanced economies. capital flows can compromise the monetary policy latitude of emerging market economies. studies show that their monetary policies respond to movements in us interest rates and exchange rates, besides their own domestic macroeconomic conditions. helene rey and silvia miranda - agrippino find that us monetary policy moves can induce changes in risk premiums across countries, move the global financial cycle, and challenge the monetary policy autonomy of emerging market economies. three, there appears to be a short - term trade - off between price stability and financial stability. macroeconomic theory and empirical evidence tell us that although there is no long - run trade - off between price stability and employment, there is a short - term trade - off. this is expressed as a “ sacrifice ratio ”, or the increase in the unemployment rate necessary to achieve a given reduction in the inflation rate. likewise, could it be that while there is no long - term trade - off between price stability and financial stability, there is a short - term trade - off? in the current conjuncture, for example, there are concerns that monetary policy tightening to bring down inflation could trigger contagious financial failures. is there an analogous “ sacrifice ratio ” between price stability and financial stability? these short - term trade - offs call for a mix of monetary and macro - financial policies to meet the twin goals of financial stability and price stability. combining the use of monetary policy and macro - financial policies can mitigate tradeoffs between objectives. studies by both the bis and imf have found that policy combinations can be more effective than using a single instrument. claudio borio and colleagues at the bis find that when low inflation in advanced economies required loose monetary policies, tightening macroprude

fatf ), the body that evaluates the anti - money laundering regimes of individual countries. meanwhile, section 4 of circular no. 1389 dated 13 april 1993, as amended, requires any person who brings in or out of the philippines an amount exceeding php 10, 000 to obtain prior bsp authorization therefore. the rule was promulgated to help prevent speculation against the peso and maintain the convertibility of the currency. vigilance in the implementation of the bsp rules, particularly in the transport of foreign currencies, is important in addressing incidents such as recent events involving the discovery by u. s. customs authorities of large amounts of undeclared foreign currency found in the possession of filipino citizens arriving in the u. s. we are glad that we will be assisted by other government agencies in this regard. the moa defines the functions and responsibilities of the various government agencies involved and aims to promote harmony and maximum cooperation in the implementation of bsp rules on the transport of currencies. the moa demonstrates the strong commitment of the government, thru the heads of the various agencies who are signatories to the agreement, in instituting measures versus money laundering in the philippines. again, thank you for your support and we look forward to the smooth implementation of the moa.