external, unbiased and credible assessments from one or multiple technically qualified bodies constitute a valuable input for domestic policymaking, as well as an important guidepost for directing international cooperation efforts, its combination with concrete proposals on the latter can enhance substantially the usefulness and effectiveness of the surveillance work. the challenges for surveillance are further compounded by the difficulties to compel participating countries to adhere to the derived policy and cooperation proposals. to this end, pure peer pressure, although desirable and indeed helpful, has proved to be insufficient. on the other hand, a compulsory approach would understandably be rejected in view of its implications for sovereignty. ex - ante agreed sanctions have been tried in regions with a strong political commitment to integration. however, as is well known, even in these isolated and difficult to replicate cases, the results have been so far unsatisfactory. the difficulties linked to efforts to furnish the surveillance function with “ teeth ” are illustrated by the reluctance of some multilateral institutions to use tools legally available to them but with potentially controversial implications. 14 this is clearly a very complex subject, but we should continue to search for efficient enforcement mechanisms, and at least encourage international institutions to draw upon all instruments at their disposal whenever needed. to conclude, i only wish to note that in the face of a world economy which is improving but that still faces formidable challenges, the need to supplement any required policy efforts in emes with international cooperation should in my view not be the subject of much debate. there are many possible avenues to move in this direction, with a varying degree of complexity. unfortunately, notwithstanding the measures adopted as a result of the global financial crisis, as in previous similar episodes the drive towards cooperation has lost considerable force. the consequent risks are obvious. i hope that we are not witnessing again the historical experience of swings in international cooperation that will make us wait for another crisis to achieve perceptible progress towards the results we need. for instance, the imf has resorted to special bilateral surveillance procedures with member countries ( currently in the form of ad hoc article iv consultations ) in only very few occasions, in spite of this being a measure that has been in place for nearly 40 years.

the major financial crisis ; iii ) the revolution in information technologies and its impact on labor and daily life ; and, iv ) the growing gap between citizens ’ expectations and their development opportunities. while long - term policies and structural reforms are much needed, escalating geopolitical and trade tensions have put pressure on central banks ’ aggregate demand management responsibilities, increasing the challenges and trade - offs for monetary policy. regarding monetary policy, it is essential to note that its role in smoothing the business cycle has become more complex. 1. advanced economies ( aes ) operate in the “ new normal ” of lowinterest rates. lower r * and the lack of inflationary pressures pose serious challenges to monetary policy : first, a more limited policy space when facing the downward phase of the business cycle. second, it may lead to excessive risk taking, thus posing financial stability risks at the national and international level. an abrupt risk - off episode could expose financial vulnerabilities accumulated during years of low - interest rates and depress global growth as highly leveraged borrowers could find it difficult to roll over debt. as you will be discussing in one of the sessions, this requires a better integration of monetary and financial stability issues. 2. in emerging markets, even though we have more policy space, central banks must be mindful that global risk appetite and portfolio adjustments in response to idiosyncratic risk factors pose serious constrains for monetary policy. thus, making it harder to focus on domestic cyclical conditions and making it necessary to better integrate monetary, capital flows and financial stability considerations. in this context, central banks face the challenge of both fulfilling their objectives and communicating more effectively the benefits that can be attained with, their mandates, their independent status and their actions on the wellbeing of citizens and on development opportunities. now let me comment on some of the other issues that will be discussed in the conference. regarding the interaction of monetary policy and financial stability, around the world, albeit under different institutional arrangements, central banks have renewed their critical role in addressing financial stability challenges. the benefits of attaining monetary policy and financial stability goals tend to mutually reinforce each other. thus, the instruments to achieve such goals are characterized by a certain degree of interaction, but also by clear differences that must be considered. along this line, a central bank must take three elements into account : 1. separability between monetary policy and financial stability goals. although monetary policy actions can contribute to stabilize the economic cycle, it