new surveillance and what new information will it offer? in this regard, the shift towards exchange - based trading of derivative products and away from “ over - the - counter ” markets may be a welcome move towards increased transparency, centralised data collection and better monitoring. electronic trading and data will mean greater availability of a wide range of financial market data. these data will provide information about market pricing, volumes, liquidity and investors ’ appetite for risk. however, just as important as information gathering is filtering, analysis, and transmission in forms suitable for economic interpretation and forecasting. much more work will need to be done on developing suitable analytical methods to achieve this. international economic surveillance what had been thought to be a financial crisis turned into an economic one in late 2008 when fast - growing economies including asian economies like singapore ( which had been the subject of a debate on international economic decoupling ), were suddenly hit with a vicious reduction in trade flows, industrial production and growth. before the crisis, models of the international transmission of economic shocks were based mainly on trade linkages. the bis central bankers ’ speeches crisis reminded us that financial market channels can cause contagion in ways that may not always be obvious. although the possibility of contagion through financial channels has long been recognised, macroeconomic models and analysis have typically relied more heavily on trade linkages as the key transmission channel of shocks across countries. however, during the crisis, the explosion in risk premiums and a changed pattern of capital flows transmitted the shock much more quickly to many economies. as a result, there has been greater focus on financial market conditions and linkages to understand the impact of international shocks on real economies. more recently, the rapid development of commodities as an asset class has meant policy easing by major central banks can be transmitted through higher commodity prices to the rest of the world. as easier monetary conditions make funding cheaper and reduce returns on fixed income investments like government bonds, investors may look for higher returns on riskier assets, such as commodities. this could potentially cause a ( temporary ) divergence between commodity prices and market fundamentals, and has prompted concern about rising inflationary pressures in many countries during recent months. this has provided new challenges for understanding transmission channels between economies and for forecasting inflation. 6 at the same time, however, the stronger relationship between commodity markets and investment flows could potentially allow us to use commodity prices as new indicators of financial conditions in global markets, although determining the precise nature of the for a discussion of

data in monetary policy formulation, triggered by the breakdown in the forecasting performance of structural and statistical models. likewise, more attention is paid to real economy imbalances and sectoral financial positions, by looking at household and business sector balance sheets, when assessing financial sector risks. as a result, there is a very active research agenda aiming to incorporate housing and financial sectors into the dynamic stochastic general equilibrium models used in many central banks. 4 this broader outlook and greater overlap between monetary and financial stability policy is reflected in the rbnz ’ s “ cobweb ” diagram, which is h. davies and d. green ( 2010 ) banking on the future : the fall and rise of central banking. independent evaluation office of the international monetary fund ( 2011 ) imf performance in the run - up to the financial and economic crisis : imf surveillance in 2004 – 7. see w. white ( 2010 ) “ some alternative perspectives on macroeconomic theory and some policy implications ”, globalisation and monetary policy institute working paper 54, federal reserve bank of dallas. bis central bankers ’ speeches used to indicate financial stability risks across several different dimensions. 5 in this framework, financial stability risks could be reflected in the global and domestic economies, and in financial market conditions. all of these areas are also routinely monitored for monetary policy formulation. following the crisis, concerns about the sustainability of sovereign debt have risen in many countries, most notably in the peripheral euro zone economies. consequently, central bankers have also needed to co - ordinate their policies more closely with fiscal policy decisions. as a result of these changes, policymakers now need a much wider spectrum of information to set policy, and central banks are now required to have broader concept of “ economic surveillance ” in mind to inform their decisions. the global financial crisis showed economic surveillance is more important than ever and how we go about that has been permanently changed. during the rest of the discussion, we will consider how different aspects of surveillance have been altered. international financial surveillance this crisis was initially about financial institutions and markets and we have learned that it is necessary for central banks and regulators to know more about financial market flows, about non - traditional financial institutions and instruments, and about the inter - connectedness of institutions, especially in the presence of instruments that can go viral. before the crisis, it a number of other institutions, including the imf, have introduced similar frameworks or indices in recent years to measure financial stability. see p. bedford and c.