situations. indeed, we have begun to buy back short -, medium - and long - term securities to inject liquidity to the market, proving that they are in fact monetary policy instruments. besides, regulatory measures were adopted – bimonthly calculation of banks ’ liquidity requirements – to “ decompress ” stress situations in the money market. clearly, for the current transition stage of the argentine economy, there is no other viable and sustainable alternative than the current managed floating regime. a system based on free floating, still called for by many, would have involved the risk of going back to the devaluation - inflation spiral that has been so recurrent throughout our economic history. in the past few days, however, we also learnt that in spite of the necessary foreign exchange stability for the current transition stage, there is no “ foreign exchange insurance. ” we have seen that on wednesday 25, when the upward trend was most marked, the exchange rate increased, leading to a volatility that ruled out hopes of guaranteed profits. when devaluation expectations became noticeable, threatening to manifest itself in the rest of the economy, we made it clear that we will mitigate steep increases potentially having an inflationary impact or causing uncertainty. once the foreign exchange rate was stabilized, we adopted measures to reduce the upward pressure on interest rates, a process that will continue until normalization is achieved. but, what do we mean when we talk about a stage of transition? in post - crisis periods, the macroeconomic fundamentals usually overreact to then gradually readjust themselves and converge towards a long - lasting scenario. these transition stages take time and raise enormous challenges. our neighboring countries ’ experience teaches us that flexibility and gradualism in both policy design and implementation are the adequate way of riding them. during the money and banking conference organized by the central bank of argentina, vittorio corbo, president of the central bank of chile, stressed the sequential process undergone by the chilean economy following the crisis of the early 1980s. four elements have been of utmost importance in this long process : consolidating fiscal solvency as a countercyclical tool, reestablishing external sustainability, restructuring liabilities, and rebuilding the financial system. once all these aspects were addressed, progress was made in the consolidation of a regime that is nowadays highly credible. thus, in 15 years, chile managed to lead inflation from around 30 percent to the current annual 2. 9 percent, after patiently building credibility and institutions.

, if we fast forward to the year 2008, and to the current financial crisis, we note that asymmetries in information between financial institutions, this time relating to the extent of exposure to and value of complex derivative products, led to a freezing up of credit markets, the eventual collapse of some important financial institutions, and the near meltdown of the entire financial system. in these events we can see the insights of akerlof in his 1970 paper. mr. chairman, the near collapse of the financial system has in turn led to a rapid and deep global recession – the sharpest since world war ii and the first in which all regions of the world were suffering a downturn in fortunes at the same time. this downturn may well have its most devastating impact on poor countries, particularly in africa – who incidentally were not responsible for the crisis. it is worth asking the question that if the basic insights on the powerful impact that a lack of information could have on markets was known as far back as 1970 – why were these lessons not assimilated into the policy making tool kit of central banks or in the financial architecture of our economies? mr chairman, i have no doubt that perhaps a large part of the answer to this question is in the fact that the 1970s had a very different financial environment when compared to our current environment. as the financial markets developed, driven by technological and financial innovation and the deregulation of financial services, financial institutions were able to price and sell risks through ever more complex financial products. the very nature of complexity of these products created the asymmetries in information that has proved catastrophic to the world economy. however, i wish to focus on another reason why akerlof ’ s insight was never fully absorbed by policy makers and the public : i believe that we allowed the workings of the financial sector to become more and more divorced from key stakeholders such as the legislature, who had the responsibility of enacting regulations governing the financial sector, and the public for whom the media was an important source of information – and so our fate was sealed. mr. chairman, clearly africa was not the source of the financial crisis, but it is being impacted by the crisis and there are many who believe that africa may well bear the long term costs of the global economic downturn – if the broad gains of the past years are reversed and the productive capacities ( e. g. human and social capital ) are destroyed due to worsening health and education outcomes. from